Setting up bank account for baby? Let me walk you through the considerations to make so you can get this — opening up a child savings account — off your to-do list and onto your ta-da list.
I've made it through cloth diapering, 2:00 a.m. feedings, and car seat installations. Now, I'm totally in the mode for setting up bank account for baby!
Our little one made his debut over a year ago. Being the financial nerd that I am − plus a darn good planner − I thought it would be awesome for me to set up a savings account for baby now while he's still in diapers to catch all of the generous birthday + holiday cash gifts throughout his childhood.
I mean, can you imagine the possibilities of how much that account could earn for him over the next 18 years?
That was 13 months + about 1,000 diaper changes ago. *womp, womp*
But you know what? There's no better time than today for me to do this, or for you to do this (even if your “baby” now sports braces).
Here's what to consider when setting up bank account for baby.
Pssst: Before we start, I wanted to let you know that we chose the Capital One Kids Savings Account for our baby. There are no minimums and no fees. Also, your child gets to have their own sign in information, even while YOU retain all the control. I think they'll really like being involved with the banking!
Capital One's Kids Savings Accounts do not offer a bonus. However, I called them and they told me how to get a $25 bonus in a roundabout way. Use this link to open a regular Capital One Savings Account with an initial deposit of $250. You will want to add your child as a joint account holder. Then once the bonus of $25 posts to the account (that's an 10% return on your baby's money already!), open a Capital One Kids Savings Account and transfer the money into it. Close the first account.
You + Your Child Will Need Documentation (or at least Some Digits) to Open a Kids Bank Account
Kids under the age of 18 cannot open up a bank account on their own. So you'll be opening a custodial bank account (here's some of the in's and outs of a custodial bank account). This means you will be part-owner to this account.
If you open a savings account at a brick-and-mortar bank, you'll need your documentation as well as your child's documentation in order to do so.
With bank accounts for kids, both of you will need your social security cards or just the numbers (not sure where your child's social security card is, or perhaps you haven't applied for one yet? Here's more info on how to get your child a social security number).
For the Capital One Kids Savings Account, I simply needed my son's Social Security Number, birth date, and other information but I did not have to provide the actual documents.
When Setting Up Bank Account for Baby, Choose the Type of Account You Want
Unless your child has a business and needs to write checks for it, your best bet is to choose a savings account. The reason is because the money is more difficult to access than if you had a checking account tied to an ATM machine.
Also, their money can earn interest. And if your child is not particularly excited about holing their money up in a bank, have them do this money-growth experiment using their new account.
Yes, checking accounts with interest earnings exist. However, your child's earnings will be less if you use one of them.
Choose an Account with the Best Earnings Potential
You know how the best outcomes come when you plan with the end in sight? Well, your endgame when setting up bank account for baby is to get your child's money to earn as much as possible over the next decade or however long they have until you turn the account over to them.
You can do that by making the right choices from the beginning. For example, you want an account that:
- Compounds Daily or Monthly: The more frequently your savings account compounds interest, the more money it will make. Trust me on this one. And time is on your child's side (especially if they're still in Stage 4 diapers!). FYI: Capital One's Kids Savings Account compounds monthly.
- Has No Fees: Just like fees can eat away from your retirement account over the years, monthly account fees can eat away at your child's growing savings. You need to find a savings account that does not charge a fee for low balances. And you don't want to pay for other account fees either.
Make Sure You Can Meet the Required Initial Deposit
For me, it's important that our child's money and our own money doesn't mix because then it might just get eaten up by our checking account's gremlin (wait, YOUR checking account has a gremlin eating all your cash as well?).
I've been keeping a mental ledger of what should go into this account. We've received $110 in cash gifts so far from his baptism + first birthday party, so that will be our seed money.
If you don't have money sitting around to get this started, then make sure you look for savings accounts with no minimum opening requirements. That way you can still get it set into place, waiting for when that first influx of cash comes through!
Weigh High Interest Rates Versus Lessons of an In-Person Bank
Children bank accounts online will offer higher interest rates than a brick-and-mortar bank. For example, while I'm writing this Capital One's Savings Accounts offer 0.75% APY while a savings account at Chase offers only a 0.01% APY…*womp, womp*.
However, with the brick-and-mortar bank, your child will see more of the actual banking industry and how things work.
My advice? Take the convenience + much higher earnings from an online savings account, and still reap some of the brick-and-mortar lessons by considering some of these options below:
- High Interest Rate + Teachable Money Moments: Choose an online bank with a higher interest rate, then when your child is old enough to get a job, open a checking account and show them the in's and out's of bank accounts then. You can still take them along with you for some in-person banking at your own checking account.
- Online Banking + Paper Statements: For the Capital One Kids Savings Account, it automatically signs your child up for paperless statements. I think it's more likely your child will keep up with their savings account if they receive quarterly paper statements instead of logging in and staring at a screen, plus receiving mail as a child is just oh-so-cool. So if I were you, I'd opt for the statements to come in the mail. If there isn't an option for this, then you can periodically print them out and go over them with your child.
- Show Them How Money is Deposited into their Savings Account: Even with an online savings account, you have to get the money there somehow. You can allow them to see the money trail by taking them with you to deposit the money into your checking account, then showing or explaining how you will then take that money and transfer it over to their savings account.
Figure Out How the Money is going to Get Deposited into their Account
Money's got to get to this new account somehow, and you'll likely want to make this step as convenient as possible so that you will go through with it − I mean, we've all got enough errands to run anyway, amiright?
A few ways to make this as convenient as possible:
- Link Your Account with their Account: When setting up bank account for baby, link your own checking account to theirs. Then funnel the money to their account through your own (be careful that this doesn't become a two-way street and their savings slowly dwindles down over the years due to unforeseen expenses; custodial accounts are like black holes, and the money is meant to become the child's when they turn of age). So you deposit any amount they receive that is theirs, then transfer from your account to their account with a few clicks.
- Choose a Bank that Allows ATM Deposits: Some online banks now offer deposits through local ATMs, upping the convenience for you.
As you can see, there's a few considerations to make when setting up bank account for baby (or toddler, or 10-year old). But once it's in place, you'll have a great catch-all for the cash money gifts your child receives over the years.
Of course the longer that those money gifts have to earn interest, the more money there will be for your child, so it's best to get going on this one, Mama Bear!