Grandparents can open several types of savings and investment accounts for grandchildren to foster long-term financial security, including Custodial Accounts (UGMA/UTMA), 529 College Savings Plans, Roth IRAs for Kids, and Youth Savings Accounts. These accounts allow for cash deposits or investments in stocks and bonds, with the custodian managing the funds until the child reaches the age of majority.
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.
If they have an earned income, the best account is a Roth IRA, but you can only match their earned income (they can't save more than they make). Otherwise, I think the best option would be a high yield savings account or CD/bond.
What Type of Savings Accounts Can You Open for a Grandchild?
Overall, what you're looking for is called a custodial account. Custodial accounts are accounts opened on behalf of a minor by someone over the age of 18. Most of the time this is done by a parent or grandparent.
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.
Greater Bank is one example of a provider that allows grandparents to open an account on behalf of their grandchildren, with its Life Saver account. The bank says that this account can help children start good habits early, and see the rewards of savings as their balance grows each month with interest.
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.
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.
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 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.
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.
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.
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.
Yes, you can give your son $100,000 tax-free in 2025 by utilizing the annual gift tax exclusion and your lifetime exemption, but you'll need to report the gift to the IRS on Form 709 since it exceeds the $19,000 annual limit, though you won't pay tax unless you exceed your much larger $13.99 million lifetime gift/estate tax exemption. The gift is considered yours (the giver) for tax purposes, not your son'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.
You can gift your your grandchildren as much money as you like, but if you want to remain under the annual exemption, tax-free gifts can be given up to the value of £3,000 per year. This can be carried forward for one year if unused, allowing you to give £6,000 in the following tax year.
If you want to invest $10,000 over 10 years, and you expect it will earn 5.00% in annual interest, your investment will have grown to become $16,288.95.
In the past few years, the internet has been abuzz in the financial planning community regarding financial wellness and planning guru Dave Ramsey's vaunted 8% proposed withdrawal rate.
Grandparents opening a savings account for a child
A grandparent can open a savings account for their grandchild. It has to be in the child's name and they must show documentation such as the child's birth certificate.
The answer is yes, with the right identity information, grandparents can set up savings accounts for grandchildren. You could start by asking your bank about the children's accounts they offer, as well as interest rates and any age limits.