Final Verdict
For an account that pays interest, offers a well-designed parent- and kid-focused mobile experience, and provides an easy on-ramp for your child to advance to teen checking, Capital One has all of your bases covered. But there are other winners if you instead prioritize maximizing earned interest, or taking advantage of incentives and rewards that will motivate your child to save more. With our list of category winners, finding the best youth savings account for you and your child should be a snap.
Compare the Best Kids’ Savings Accounts
| Category & Winner | Age limits |
Minimum balance | Interest rate |
Special features |
|---|---|---|---|---|
| Capital One Best Overall |
Up to age 18; checking available at 8 |
$0 | 0.30% APY | Top-rated mobile app |
| USAlliance Financial Best for Young Children |
Up to age 12; checking available at 13 | $0 | 2% APY on first $500 | $10 annual birthday bonus through age 12 |
| Alliant Credit Union Best for Teens |
Up to age 18; checking available at 13 |
$100 to earn interest | 0.55% APY on balances over $100 |
Excellent teen checking, with ATM fee refunds |
| Spectrum Credit Union Best for Maximum Interest |
Up to age 21 | $0 | 7% APY on first $1,000 | Highest youth account APY |
| Northpointe Bank Best for Substantial Savers |
Up to age 21 | $0 | 1.50% APY up to $1,000, then 1.11% APY to $10,000, then 0.35% beyond $10,000 | Excellent blended interest rate for high balances |
| Pen Air Federal Credit Union Best for Savings Incentives |
Up to age 18; checking available at 8 | $25 | Cash bonuses instead | $10 bonus for opening, $20 for $250 balance, $30 for $500 balance |
Frequently Asked Questions
What Are Savings Accounts for Kids?
Kids or youth savings accounts are bank or credit union accounts available only to those customers under the age of 21, though sometimes capped at age 12 or 18. The best ones pay higher interest rates than adult accounts as a way to incentivize young savers. However, the balances on which those higher interest rates apply are often capped.
A youth savings account for a child under 18 will always require joint ownership with an adult, generally the child’s parent, grandparent, or guardian. As such, the adult account holder has full access and transactional authority over the account, while the child generally has some limitations on transactions they can conduct.
Do You Pay Taxes on Children’s Savings Accounts?
Whether or not your child needs to pay taxes on their savings account earnings depends on how much unearned income they’ve received during the year. Unearned income includes earnings such as bank interest and investment income, and any amount below $1,100 is exempt from income tax under the “Tax On A Child’s Investment And Other Unearned Income” rule, more commonly known as the Kiddie Tax.
If your child’s yearly unearned income exceeds $1,100 but is under $2,200, the amount above $1,100 will be taxed at the child’s rate, which is usually low or zero. But if they earn more than $2,200 in unearned income in one year, the amount above that threshold would be taxed at the parents’ (usually higher) rate.
For many children, especially young ones, they are unlikely to earn more than $1,100 in interest, essentially making their earnings tax-free.
How Can I Open a Savings Account for My Child?
Most banks and credit unions, including all of those recommended above, allow online account opening, making it easy to start the process at home and on your schedule. However, because these are accounts for minor children, you (or another adult who will serve as the primary account holder) will also need to apply. So before beginning the online application, have your driver’s license handy.
For accounts held at credit unions, you need to establish membership in the credit union. Often this is done as part of the online application, though occasionally you may need to establish membership first and then come back to open an account. In any case, both the adult account holder and the child will need to apply for credit union membership.
After the account is open, you may need to set up the initial funding as a separate step. This may also involve linking to one of your accounts at another institution. To handle all of these steps, it’s good to allow three to five business days for everything to finalize and your child’s account to be ready for normal activity.
What Are the Benefits of Opening a Kids Savings Account?
A clear benefit of establishing a youth savings account is creating a learning opportunity for your child on money management, how to bank, and the importance of saving. Not only can they learn the logistics of how to use a bank account, but they can also begin to appreciate the value of seeing their balance grow, including from earned interest and other rewards.
If you save for your child in a bank account in your own name, they won’t be able to view the account or implement transactions. In addition, the earnings on the account would be taxed at your adult taxpayer rate, diminishing the returns your child can earn on their savings.
How We Chose the Best Savings Accounts for Kids
We began our research by first identifying almost two dozen youth savings accounts that are available to consumers nationwide and that pay at least 0.25% APY. From there, we dug into the details to find those that charge no fees, offer the highest interest rates, and allow the highest balances, and offer a complimentary checking or spending account. We also considered the age limits of each account, the mobile app features, and any added perks offered by the account, enabling us to distill the list down to these top six contenders.
