How to Open a Savings Account for your Baby

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Our ultimate goal as parents is to raise healthy, whole children who will have better opportunities than we were afforded and contribute positively to society.

One way that we’re able to do that is by starting them off on the right financial foot.

The first step in making this a reality is by, first, ensuring that we’re actually financially prepared to bring children into the world. Then, the next step is to do our part and start saving for their future.

For most, setting up a savings account for their baby is an afterthought to making sure other bills and responsibilities get taken care of.

I get it.

However, that’s how families continue to live in the same cycle of lack, poverty, and the inability to attain financial freedom.

Even if you don’t think that you can afford to start a savings account for your baby, contributing the smallest amount can make a huge difference.

Saving for your child’s future has to be just as much a priority as any other bill, if not more of a priority.

How much should you save for your baby?

First, let’s dispel the myth that you have to have a lot of money to even begin saving because you don’t.

Let’s do some math…

If you were to save $1/day, every day for the first 18 years of your child’s life, how much would you have saved?

$1 X 365 days per year X 18 years = $6,570

Now, to some, roughly $6,500 doesn’t seem like a lot of money. But, I’ll argue that for a kid who comes into the world with nothing, it can be a lot. 

Furthermore, for families who find it impossible to even put $1,000 toward an emergency fund, it’s a great feat to accomplish. 

That $6,500 could be a semester of college tuition, start-up funds for a business,  money towards a car, or funds that can be used to start investing. 

Whatever it’s used for, it’s a headstart that your child may not have had otherwise.

I’ll also mention that this doesn’t take into account that these funds can be put into an interest-bearing or investment account that would allow it to grow exponentially over time.

The point here is that you can start saving for your child’s future with something as small as $1 a day. 

There is no right or wrong amount. Just start saving!

How do I start saving for a baby?

Now that you understand that it’s less about the amount and more about the exercise and discipline of saving, let’s put a strategy behind it.

In other words, let’s create a plan to make sure you stay on track.

It’s easy to say, “put a dollar away each day,” but how do you actually ensure that it happens?

Make it a priority

First and foremost, saving for your child’s future needs to be a priority. 

What you don’t prioritize won’t be actualized.

You must commit to saving for your child the same way you commit to watching your favorite TV show when it comes on or your religious commitment to getting your hair or nails done each week.

Planning for it means that it is a priority. And the way that you plan is with a budget.

Add it to your budget

If you don’t have a budget already, then I recommend that you download a free copy of my eBook, Dump Debt & Build Bank: The Everyday Chick’s Guide to Money. In the book, I walk you through how to create a budget in a few easy steps.

Once you’ve gotten the ebook and have mastered budgeting your current expenses, the next thing that you need to do is add a line item called “Savings account for Baby” or whatever works for you.

The point is that it is now a line item on your weekly financial plan.

Based on your financial situation, add whatever amount is appropriate and doable at the time. The point is to plan for it and make it a priority among your spending.

If you’re really committed to cause, make it one of the first things that gets “paid” when you’re handling bills.

Automate it

The old adage goes, “out of sight, out of mind.” This is the key to successfully saving–whether for your child or something else.

If you want to make saving easy, simply automate it.

That’s right. You can set up your bank account such that funds are automatically transferred into whatever savings account you choose for your child. (I’ll talk more about your options later).

Some employers even let you split up your direct deposit from your paycheck into multiple bank accounts. You can leverage this to automatically add funds to your baby’s savings account each time you get paid.

Either method works because they don’t rely on your memory or discipline for it to get done.

This is how you ensure that you’re putting money in a savings account for your baby without having to even think about it.

Don’t touch it

After you’ve automated your savings, leave the money there. The money is meant to be saved, not touched or spent.

This is where that adage comes in again. 

When choosing what savings account to use for your baby, it needs to be somewhere that isn’t easily accessible or that you see every day.

Otherwise, you may be tempted to dip into the funds to pay for things that the money was never intended for.

Remember, this money is for your child’s future, not your present expenses.

Can you open a savings account for a baby?

I’ve mentioned having a savings account for your baby several times now, however the answer to if you can open a savings account for a baby may not be obvious.

Simply put, yes. There are three ways that you can open a savings account for a baby.

  1. Open an account under your and/or your spouse’s name that you use to save funds exclusively for your baby. (This is what we currently do).
  2. You can open a joint account with your child. In this case, your child will have access to the funds and the ability to use them when they’re older.
  3. Open a custodial account. Your child will not have access to manage funds in this account and cannot take possession of it until they reach legal age.

Each of these options has its own inherent advantages and disadvantages that you’ll need to research in your decision-making process.

My husband and I chose to open an online bank account in both of our names. We did this because we started saving for our child before she was born. 

So by default, we were unable to open a joint or custodial account because our child wasn’t born yet.

Again, you can choose whichever account works best for you with a bit of research.

How do I set up a savings account for my baby?

Opening a savings account for your baby is no different from opening a savings account for yourself.

Here are the three things that you need to do:

  1. Determine which bank or credit union that you want to use for the account. If you need help with what to look for, read this guide to choosing a savings account.
  2. Collect necessary documents. For a baby, a birth certificate or Social Security card should suffice.
  3. Have the minimum deposit available. Depending on which bank or credit union you choose for your account, the amount necessary will differ.

In many cases, you can open this account online or over the phone.

What is the best savings account for a baby?

The best savings account for a baby is the best savings account in general. 

There are a few things that you need to take into consideration when choosing a savings account.

  1. Fees – Take into consideration what you’ll be charged for. For example, there may be a minimum balance requirement that you must meet. If you don’t, you may be charged a fee.
  2. Annual Percentage Yield (APY) – How much interest will you earn from using the account? Is it higher than average?
  3. Minimum deposit – How much money will you need to open up the bank account? Some banks have a $0 deposit to open, while others require a $25 or more deposit.

Ultimately, you want to choose the account that has the least amount of fees, a high APY, and preferably no minimum deposit.

Alternative to baby savings accounts

Putting your child’s savings in a traditional bank account is a great start. However, you may want to be more specific about what the money is used for.

For example, you may want to save specifically for your child’s college education.

There are vehicles specifically for saving for educational expenses that also provide tax benefits to you. 

Consider taking advantage of these accounts as opposed to simply putting your funds in a traditional savings account.

Here are two that you can explore: 

529 Plan

A 529 Plan is a tax-advantaged investment account that can be used to save money for your child’s education. 

Tax-advantaged simply means that you will not pay income taxes on the earnings as long as they stay in the account. Additionally, if funds are not used for educational purposes upon withdrawal, you will be taxed.

There are no income limits on who can contribute to a 529. However, plans do vary by state. This state-by-state guide to 529 Plans provides more information based on your state.

Education Savings Account (ESA)

Another option to save for your child’s education is with an ESA.

Similar to the 529 Plan, it is a tax-advantaged investment account that you can use to save for education. 

However, contrary to the 529 plan, there are income restrictions that limit who can use the plan. 

Additionally, funds must be used by age 30 (different from the 529) and can be used for any level of education, not just college.

To understand the difference between these two plans, I recommend reading this 529 vs ESA comparison article by Chris Hogan.

Final Thoughts on Opening a Savings Account For Your Baby

It’s never too early to start saving for you baby’s future.

Afterall, the sooner you start, the more you’ll be able to put aside for the future. Whether it’s for their college education, to start a business, for the down payment of a home, or something else, saving now will give them a better financial future.

Hopefully, this post shed some light on how to open a savings account for your child so that you can get started today!

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