Yes, you can open an investment account for your grandchild, most commonly a custodial account (UGMA/UTMA) managed by you for their benefit until they reach adulthood (around 18-21), offering broad investment flexibility for any future use, though it can affect college aid; other options include dedicated 529 plans for education or custodial Roth IRAs if they have earned income.
Custodial accounts (UGMA/UTMA)
With a custodial account, you can either save or invest for your grandchild's future. The custodian, usually a parent or grandparent, is in charge of managing the account while the child is still a minor (which could be under age 18 or 21, depending on the state of residence).
The best account for a grandchild depends on your goal: a 529 Plan is ideal for tax-free education savings; a Custodial Account (UGMA/UTMA) offers broad flexibility but transfers control at adulthood; a Custodial Roth IRA is great for retirement if the child has earned income; while a simple High-Yield Savings or TreasuryDirect Savings Bond works for short-term goals with less investment risk, providing flexibility for general use.
As most people are saying, 529 is the best option. It can provide for college or trade school, and then whatever she doesn't use can be converted to a retirement account (relatively new law allowing this). It gives her medium and long term benefits that the parents can't touch.
Whether you buy an electronic bond or a paper bond, you must specify who owns the bond. You may name yourself, a child, yourself and someone else (either as another owner or as the beneficiary), or indeed anyone you want to give the savings bond to as a gift.
One can also open up TFSAs for family members including minors, as well as to set up TFSAs for specific purposes like paying off a child's education.
State-administered 529 education savings plans are the go-to choice for many families, and their generous tax benefits are a big reason why. The money your grandchild withdraws for qualified education expenses — including private K-12 education expenses — is completely tax-free.
Other gifts to children or grandchildren are potentially exempt transfers. If you die within seven years of handing over the money, it will be considered part of your estate and taxed accordingly. But if you live beyond that, the money won't be taxed.
Savings, CDs, and Bonds
Having money in savings at an early age will let your grandkids benefit from compounding interest, especially if you find a high-yield savings account for kids. You can also consider opening a certificate of deposit (CD) or purchasing savings bonds for your grandchildren.
In many cases, you can open a junior savings account as soon as a child is born. But if your grandchild is older, it's not too late to get ahead with a Junior Pension, First Saver savings account or Premium Bonds.
You can add your grandchildren to your will and give them either a fixed amount or a percent of your estate. Setting up a trust for your grandkids may give them lower tax options and may also give you more control over how and when they can use the funds. You can: Set guidelines for how they should use the money.
Where to store savings for grandchildren
The best way to invest $1000 for a child depends on your goal, with a Custodial Brokerage Account (UGMA/UTMA) offering the most flexibility for general uses (car, home) and a 529 Plan ideal for tax-advantaged college savings, while a Roth IRA for Kids suits earning children for long-term growth, all leveraging long-term growth potential through ETFs or index funds, with the new "Trump Account" being a specific, limited-time option for younger kids.
If your child or grandchild is a minor, you can open a custodial Roth IRA for them. The same earned income requirement applies to minors.
If a grandparent gives less than $19,000 to any one grandchild during the year, no filing or tax applies. Gifts above that limit simply require Form 709, but gift tax is only owed once total lifetime gifts exceed the $13.99 million exemption.
Technically speaking, you can give any amount of money you wish as a gift to one or more of your children or any other member of family. Some parents also choose to buy property and put it into their child's / children's name(s).
The IRS primarily learns about large gifts when you file Form 709, the Gift Tax Return, for amounts exceeding the annual exclusion (e.g., $19,000 per person in 2025). They can also discover gifts through third-party reporting (banks reporting large cash transfers), audits of your estate, or by matching transactions to public records, especially for significant asset transfers like property, which might trigger property tax reassessments.
Grandparents can open various accounts for grandchildren, including flexible Custodial Accounts (UGMA/UTMA) for general use, dedicated 529 Plans for education (which grandparents can own and control, with no financial aid impact from 2024-25), tax-advantaged Roth IRAs if the child earns income, or simple Kids' Savings Accounts, plus options like CDs and Savings Bonds, with choices depending on goals for flexibility, control, and tax benefits.
For newborns and those under 18: If you're the parent or guardian of an eligible child, you can set up and contribute to the child's Trump Account. Your child's grandparents and other family members may also contribute to your child's account.
Some children's savings accounts let grandparents open them – you'll usually act as a trustee, managing the money until your grandchild turns 16 or 18. You'll often need the parent or guardian's permission and the bank will usually want to see the child's birth certificate.
The five key mistakes to avoid in a TFSA are over-contributing (and re-depositing withdrawals in the same year), treating it like a basic savings account (missing out on investment growth), failing to track your room (relying solely on CRA data), improperly moving funds (withdrawing and redepositing instead of transferring), and investing in non-qualified assets or high-risk trades (like day trading or certain foreign stocks that incur withholding tax).
You generally won't find 7% on standard savings accounts, but can find it on Regular Saver Accounts (like First Direct or Co-operative Bank in the UK) or with specific Credit Unions (like Community Financial Credit Union in Michigan for up to $1,000 balance). For kids, some accounts like WECU offer 7% on small balances, while some high-yield checking accounts or accounts in other countries (like India's IDFC Bank) might hit 7% with strict conditions or large deposits.
Roth IRA for Kids
Roth IRAs are one of the best long-term savings options for a child because they offer: Tax-free growth on contributions. Tax-free withdrawals during retirement. Compounding interest that turns small, early deposits into meaningful wealth.