The best savings account for kids
A complete guide to children’s savings accounts
Key takeaways
- The purpose: A dedicated child savings account can help fund education, emergencies, and big goals, while also letting younger kids learn about money and financial concepts.
- Types of accounts: There are several types of savings accounts available for kids, including traditional, high-yield, custodial accounts, savings bonds, and 529 savings plans.
- What to consider: When choosing a savings account for your child, consider interest rates, fees, accessibility, and additional features.
In an era of financial uncertainty, securing your child's future is a top concern for many parents. One of the most fundamental steps towards achieving this goal is establishing a savings account for kids. Such an account not only serves as a repository for funds but also as an invaluable tool for imparting essential financial literacy.
This guide aims to explain the landscape of children's savings accounts, offering a comprehensive overview of the various types available, their unique benefits, and strategies to optimize their growth potential.
Is a kids’ savings account a good idea?
Saving money for your child is a crucial investment in their financial well-being and future success. Early savings initiatives not only foster financial literacy but also unlock the power of compound interest. This allows even small contributions to grow substantially over time. Plus, savings accounts for kids give children the opportunity to learn how interest is earned and see their money grow in a safe place.
There are several reasons to consider a kids’ savings account for your child's future:
- Education: Offsetting the rising costs of higher education and potentially minimizing the need for student loans.
- Emergencies: Providing a safety net for unexpected expenses and financial hardships.
- Future goals: Enabling your child to pursue dreams such as buying a home, starting a business, or traveling.
It’s never too early to start contributing to a children’s savings account. The significance of early savings is emphasized by data from the Education Data Initiative.¹ It shows that families who utilize college savings funds, such as a tax-deductible 529 plan, accumulate an average of $6,844 in savings.
Types of savings accounts for kids
The best savings account for kids is not a one-size-fits-all solution. The ideal choice depends on various factors, including the child's age, your financial goals, and your desired level of control over the account.
There are various options available for children’s savings accounts.
Traditional savings accounts
- Overview: These are basic savings accounts offered by most banks and credit unions. They typically have low minimum balance requirements and minimal fees.
- Pros: They’re usually easy to open and manage and can help children to learn basic banking concepts.
- Cons: Traditional savings accounts often have low interest rates, limiting potential growth over time.
High-yield savings accounts
- Overview: High-yield savings accounts prioritize maximizing interest earnings.
- Pros: They generally have higher annual percentage yields (APYs) than traditional child savings accounts.
- Cons: These may require higher minimum balances or, if offered by online banks, have limited in-person access.
Custodial accounts (UTMA & UGMA)
- Overview: Only available for minors, these accounts allow for investment in other assets, such as stocks or bonds. Custodians on the account are removed once the child reaches the age of majority (between 18 and 21, depending on state law).
- Pros: They generally have greater flexibility in investment choices and potential for higher returns.
- Cons: Assets in the account may affect the child's eligibility for financial aid, and transfers are irrevocable.
Savings bonds for kids
- Overview: While not a typical kids’ bank account, these are government-backed bonds purchased in a child's name, offering a guaranteed rate of return.
- Pros: They’re considered a safe and secure investment, exempt from state and local taxes.
- Cons: Savings bonds may have lower interest rates than some other kids’ savings accounts and have limited liquidity, meaning it is hard to take out money.
College savings accounts (529 plans)
- Overview: These accounts let parents save for their child’s future education.
- Pros: Earnings grow tax-free, and withdrawals for qualified college expenses aren’t taxed at the federal level.
- Cons: Unlike a typical bank account for kids, the funds must be used for education expenses (tuition, books, and student loan payments) to avoid penalties.
By carefully considering the various options and seeking guidance from financial professionals, you can make an informed decision that sets your child on a path to financial success.
Opening a savings account for your child
It’s generally easy for parents or legal guardians to open a child savings account on behalf of a minor. The process typically involves selecting a financial institution, gathering the child's identification and an initial deposit, and applying for an account, often online or in person.
Selecting the right bank or credit union involves weighing factors such as:
- Interest rates: Compare interest rates (APYs) offered by different banks to find the most competitive option. High-yield savings accounts for kids often offer the best returns.
- Fees: Be mindful of monthly fees, transaction fees, and minimum balances.
- Accessibility: You may want to consider institutions with user-friendly online or mobile banking tools suitable for children. This can help them learn to manage their money and track their savings progress.
- Additional features: Some banks offer educational resources, matching programs, or other incentives to encourage saving for kids.
Please note that while savings accounts on the Raisin platform offer opportunities to earn competitive interest rates, they cannot be opened for children and use of Raisin services is reserved for adults in the United States.
Involving your child in the selection process, as age-appropriate, can foster valuable financial literacy skills and encourage a sense of ownership over their savings.
Teaching healthy money habits with a savings account for kids
Understanding the different types of accounts available, choosing the right institution, and implementing smart savings strategies, allows you to equip your child with the financial literacy and resources necessary to navigate an increasingly complex economic landscape.
The best time to start saving is now. Even small, consistent contributions can have a profound impact over time, due to the compounding nature of interest, and can help empower the next generation with the financial tools they need to succeed. If you're also thinking about ways to save for your grandkids, check out our guide to savings accounts for grandchildren.
Investing in your child’s future
Understanding the different types of children’s savings accounts available, choosing the right institution, and implementing smart savings strategies, allows you to equip your child with the financial literacy and resources necessary to navigate an increasingly complex economic landscape.
The best time to start saving is now. Even small, consistent contributions can have a profound impact over time, due to the compounding nature of interest, and can help empower the next generation with the financial tools they need to succeed.
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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*APY means Annual Percentage Yield. APY is accurate as of April 26, 2026. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.
Raisin is not an FDIC-insured bank, and FDIC deposit insurance only covers the failure of an insured bank.
Raisin is not an NCUA-insured credit union. NCUA deposit insurance only covers the failure of an insured credit union.
Raisin does not hold any customer funds. Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through Raisin.com. The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered by the applicable bank or credit union through Raisin.com. Each customer also authorizes the Service Bank to move funds among the various banks and credit unions at the customer’s request. First International Bank & Trust (FIBT), Member FDIC, is the Service Bank. Bell Bank and Starion Bank, each Member FDIC, are the Custodial Banks.
†Based on $250,000 in FDIC or NCUA insurance coverage per insurable category of ownership at each partner bank or credit union on the Raisin platform (each a "Product Bank"), when aggregated with all other deposits held by you at such Product Bank and in the same insurable category. Deposits made through Raisin will be eligible to receive deposit insurance from the FDIC or the NCUA (each a "Deposit Insurer") in accordance with and up to the maximum amount permitted by law at each Product Bank. Raisin is not a bank or credit union and does not hold any customer funds. Funds are held at FDIC-insured banks and NCUA-insured credit unions. Deposit insurance covers the failure of an insured bank or credit union. Certain conditions must be satisfied for pass through deposit insurance coverage to apply. Customers may choose to deposit funds with identically registered accounts at different Product Banks on the Raisin platform to be eligible for Deposit Insurer coverage up to $10 million for individual accounts and $20 million for joint accounts when at least 40 Product Banks are utilized. Please be aware, however, that any deposits you have at a Product Bank, whether through the Raisin platform or outside the Raisin platform, that you may hold in the same capacity (such as in an individual capacity or joint capacity) count toward the applicable Deposit Insurer's deposit insurance maximum amount, and any such amounts that you hold in the same capacity at a Product Bank that exceed the maximum insurance coverage by the applicable Deposit Insurer will not be insured. For more information on FDIC deposit insurance, please see here. For more information on the NCUA share insurance fund, please see here. You are solely responsible for monitoring the amount of funds you have on deposit at each a Product Bank, whether through the Raisin platform or outside the Raisin platform, to confirm that the deposits you hold in the same capacity at each Product Bank do not exceed the maximum deposit insurance coverage provided by the applicable Deposit Insurer.