The best bank account for a grandchild depends on whether the goal is long-term growth or early financial education. Top options include Custodial Accounts (UGMA/UTMA) for investing in stocks/bonds with no contribution limits, 529 Plans for tax-advantaged education savings, or high-yield youth savings accounts at banks like PNC Bank or Capital One, which offer FDIC insurance and easy access.
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).
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.
Custodial accounts are another type of account appropriate for grandparents to open for their grandchildren. These types of accounts are managed by an adult family member on behalf of a minor (someone under the age of 18 to 21, depending on state law).
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.
You can gift a grandchild up to the annual gift tax exclusion amount (around $19,000 per person in 2025/2026) without any tax implications or reporting; gifts exceeding this amount must be reported on a gift tax return (Form 709) but only count against your substantial lifetime gift tax exemption (nearly $14 million in 2025), meaning you likely won't pay tax until you've given away massive sums over your lifetime. Married couples can combine their exclusions to give double.
Some banks, like Greater Bank, allow anyone to open an account for a child but you'll need to do so in branch and have the child's birth cirtificate. These savings accounts are in the child's name, but managed by the adult until the child is older – usually from 14 years.
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.
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.
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.
By setting up an informal trust account, you can make irrevocable gifts of cash or securities to your grandchild. An adult (the trustee) administers the account until your grandchild reaches legal age, which is determined by provincial law.
The California Kids Investment and Development Savings Program (CalKIDS) is a universal savings account program launched in 2022 that creates 529 college savings accounts (CSAs) for every child born in the state of California. CalKIDS gives families a jumpstart in saving for future college or career training.
You can get children's saving accounts, like Junior ISAs, to help you save up a tax-free trust fund for your children, grandchildren, cousins, siblings etc.
Options for saving and investing for your 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.
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.
A TFSA is a type of registered investment account, which means you can hold income-generating investments in it versus just cash (like a savings account). The types of investments you can buy in your TFSA depend on where you open an account.
Access Bank – Early Savers Account
The account is opened and operated by parents (in trust) for their children till they become adults to encourage healthy financial habits and literacy in children. The account is opened with a minimum balance of N1,000 and has an interest rate of 5.40% p.a.
Custodial accounts (UGMA/UTMA)
Custodial accounts, like Uniform Gifts to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) accounts, are ideal ways to set aside money that's controlled by an older relative until the grandchild reaches adulthood.
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.
Custodial savings account
Custodial savings accounts allow an adult to open an account for a child and manage it until the child reaches the age of majority. With some custodial accounts, the child won't have access to the account—or even information about it—until they turn 21.
Trusts can be especially beneficial for minor grandchildren, as they allow more control of the assets, even after your death. By setting up a trust, you can state how you want the money you leave to your grandchildren to be managed, the circumstances under which it can be distributed, and when it should be withheld.
Invest529 offers a simple and convenient way for grandparents to save for their grandchildren's future education expenses. By opening an Invest529 account, you'll realize tax advantages while also taking an active role in shaping their educational journey.