Teaching your children about the importance of saving and how to manage money is imperative, and it's helpful to start early. Most banks won't let children open savings accounts without the consent of an adult, who is ultimately responsible for the minor's account. If you're the one responsible, you have full access to the money in your child's account.
Most banks won't set up accounts solely for minors. Instead, they create a custodial account that names one adult, usually a parent, as the custodian. This person has full access to the account, even though the account is in the child's name. This includes online access and the ability to write checks or withdraw funds for any reason. If you're the custodian of your child's account, you can use the money saved there.
Being a parent doesn't provide automatic access to your child's savings account. For example, if the child's grandmother created the account and is listed as the custodian, neither you nor your child's other parent have any rights to access the account. If you are the custodian, no one else, including another parent, can use the money in the account.
Transferring the Account
Once your child reaches 18, he is able to take over full control of his savings account. This means a quick trip to the bank, where you sign over your rights as custodian. Your child's name is already listed as the account holder, so no other changes are needed to give him sole access. At this point, you'll no longer be able to use the money in the account as the custodian.
Educational Savings Accounts
Many parents choose to open their children's educational savings accounts in the names of the children rather than in their own names. Tax advisers often recommend this so you don't have to claim the interest, but check with your tax professional to determine what is right for your family. These educational savings accounts are usually different than standard savings accounts because you often incur penalties for early withdrawal of the money. However, if you sign up as the adult responsible for the account, you can use the money, minus any penalties. Some of these accounts allow you to let more than one adult access the account, meaning both parents can use the money.
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