Has your child been stashing nickels and dimes in their piggy bank to the point it’s stuffed? As they start learning to save, you may want to consider putting the money in an account. But if you’re uncertain about which is the best savings account for kids, let’s explore your choices.
Parents can open a savings account and designate it for a child, even when minors can’t open a savings account by themselves. As the account owner, they can use it as a tool to teach them the ins and outs of saving money.
Custodial accounts, where an adult is designated as the custodian of its funds, are the most common type of kids savings accounts. You could open a custodial savings account at a bank, including Ally Bank or a credit union. The money in these accounts is the property of the minor but is managed by the custodian.
When the minor reaches their state’s legal age of adulthood, the funds are turned over to them. The most common types of custodial accounts are known as Uniform Gift to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA), depending on your state.
You also have the option of opening a custodial account through a brokerage like Ally Invest, where you can gift stocks, mutual funds and bonds to your child.
Security: Be sure to choose a bank that is a member of the Federal Deposit Insurance Corporation ( FDIC), such as Ally Bank. Deposits in FDIC-member banks are insured up to the maximum amount allowed by law.
Interest: A good metric to look at when comparing savings accounts is annual percentage yield, which accounts for the interest rate and compounding periods. The more frequently interest compounds, the more you can earn. Ally Bank Savings Accounts also include features like buckets and boosters to help automate and grow your savings further.
You can also consider factors like minimum balance requirements, account access, potential fees and website usability.
You can open a savings account online in just a few steps. As a bonus, savings accounts offered by online banks tend to offer more competitive interest rates than traditional brick-and-mortar banks due to lower overhead costs.
Guiding your kids with smart financial behaviors can benefit them now — and in the future.
A trust is an estate-planning tool to manage assets and provide instructions on distributing assets owned by the trust. If you set up a trust with your child as the beneficiary, you can generally outline when and how they gain access to the money in the account. A trust can be the custodian on a child’s account, but a legal professional can help you outline the best tools for your particular goals.
If you want your child to have an account to withdraw from or use with a debit card, you might consider opening a joint checking account — if your state and financial institution allows it.
Joint accounts typically require an adult to serve as the primary account holder. Remember, joint accounts owners have equal access, so your child will have full access to the money in the account.
Just like adults’ accounts, children may be taxed on interest earned in a savings account. Currently, if a child has more than $2,500 of unearned income it may need to be reflected on your child's tax return.
As a parent, you want to set your child up for success as they get older. Guiding your kids with smart financial behaviors can benefit them now — and in the future.
Savings by your kid's age: How much to save for their milestones
Oct. 18, 2023 . 3 min read
How to open an Ally Bank account
Aug. 22, 2023 . 3 min read
Buckets and boosters: Smart resources to help you save
May 8, 2023 . 3 min read
Money solutions and strategies sent straight to your inbox.Tips and tools to help you build your best financial future.
A FEW THINGS YOU SHOULD KNOW
Ally Financial Inc. (NYSE: ALLY) is a leading digital financial services company, NMLS ID 3015 . Ally Bank, the company’s direct banking subsidiary, offers an array of deposit, and mortgage products and services. Ally Bank is a Member FDIC and Equal Housing Lender , NMLS ID 181005 . Credit products and any applicable Mortgage credit and collateral are subject to approval and additional terms and conditions apply. Programs, rates and terms and conditions are subject to change at any time without notice.
Ally Servicing LLC, NMLS ID 212403 , is a subsidiary of Ally Financial Inc.
The information contained in this article is provided for general informational purposes and should not be construed as investment advice, tax advice, a solicitation or offer, or a recommendation to buy or sell any security. Ally Invest does not provide tax advice and does not represent in any manner that the outcomes described herein will result in any particular tax consequence.
Prospective investors should confer with their personal tax advisors regarding the tax consequences based on their particular circumstances.
Securities products and services offered through Ally Invest Securities LLC, member FINRA/SIPC. For background on Ally Invest Securities go to FINRA’s BrokerCheck . Advisory services offered through Ally Invest Advisors Inc., a registered investment adviser. Ally Invest Advisors and Ally Invest Securities are wholly owned subsidiaries of Ally Financial Inc. View Invest disclosures. Securities products are NOT FDIC INSURED, NOT BANK GUARANTEED and MAY LOSE VALUE.
Options involve risk and are not suitable for all investors. Review the
Characteristics and Risks of Standardized Options brochurebefore you begin trading options. Options investors may lose the entire amount of their investment or more in a relatively short period of time.
Trading on margin involves risk. You can lose more funds than you deposit in a margin account. Please review Ally Invest’s Margin Account Agreement and Disclosure for more information regarding margin trading.
Before you invest, you should carefully review and consider the investment objectives, risks, charges and expenses of any mutual fund or exchange-traded fund (“ETF”) you are considering. ETF trading prices may not necessarily reflect the net asset value of the underlying securities. A mutual fund/ETF prospectus contains this and other information and can be obtained by emailing support@invest.ally.com.
While the data Ally Invest uses from third parties is believed to be reliable, Ally Invest cannot ensure the accuracy or completeness of data provided by clients or third parties.
Ally credit cards are issued by Ally Bank, Member FDIC. Mastercard and the circles design are registered trademarks, and Mastercard ID Theft Protection is a trademark, of Mastercard International Incorporated. ©2024 Mastercard. All rights reserved. Certain terms, conditions, and exclusions apply. Cardholders need to register for this service. This service is provided by Iris® Powered by Generali.
FICO® is a registered trademark of the Fair Isaac Corporation in the United States and other countries.
App Store is a service mark of Apple Inc. Google Play is a trademark of Google Inc.
Zelle and the Zelle related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
Ally and Do It Right are registered service marks of Ally Financial Inc.
