Yes, but with real limits on who can open one and how much control the minor has

A minor can hold a high yield savings account, but not in the way an adult can. Banks do not let anyone under 18 open an account alone. Instead, a parent or guardian must open a custodial account — one where the adult's name appears alongside the minor's, and the adult controls the account until the minor reaches the age of majority (usually 18, sometimes 21).

The second limit is the account itself. Most banks that offer high yield savings accounts to adults do not offer them to minors at all, even in custodial form. The banks that do accept custodial high yield accounts are fewer, and some cap the interest rate or require a minimum balance that makes the account less attractive than it would be for an adult.

If you are a parent or guardian looking to build savings for a minor, a custodial high yield account is possible but requires shopping carefully. If you are a teen wanting to open your own account, you will need an adult co-owner, and the account will not be truly yours to control until you turn 18.

Key Takeaways

  • A parent or guardian must open and own a custodial account on behalf of a minor; the minor cannot open an account alone.
  • Most major banks that offer high yield savings do not have custodial versions, so you will need to check with specific banks or credit unions.
  • The adult on the account controls deposits, withdrawals, and account decisions until the minor reaches the age of majority.
  • Some banks that do offer custodial high yield accounts may pay a lower interest rate or require a higher minimum balance than they do for adult accounts.
  • When the minor turns 18 or 21 (depending on state law), the account typically converts to a standard adult account under their sole control.

How custodial accounts work and who controls the money

A custodial account is a legal arrangement where an adult (the custodian) holds and manages money on behalf of a minor (the beneficiary). The custodian's name and the minor's name both appear on the account. The custodian has full control: they decide when money goes in, when it comes out, and how it is invested or saved.

The minor's name is on the account for tax and legal reasons. Any interest the account earns is reported under the minor's Social Security number, which can have tax advantages depending on the minor's total income. But the minor cannot withdraw money, change account settings, or close the account without the custodian's permission.

This arrangement exists because minors cannot enter into binding contracts, including the contract you sign when you open a bank account. The law requires an adult to be responsible for the account's terms and any obligations that come with it.

Which banks and credit unions offer custodial high yield savings

Online banks are more likely to offer custodial high yield savings accounts than traditional brick-and-mortar banks, but the list is still short. Marcus by Goldman Sachs and Ally Bank both offer custodial savings accounts, though neither currently advertises a separate "high yield" product for minors — they offer the same rate as their standard savings account, which may be lower than their adult high yield rate.

Credit unions vary widely. Some credit unions allow custodial accounts and pay competitive rates; others do not offer custodial accounts at all. The best approach is to call your local credit union or check their website for "custodial account" or "minor account" options.

Traditional banks like Chase, Bank of America, and Wells Fargo offer savings accounts for minors but typically do not label them as high yield, and the interest rates are usually much lower than what online banks pay. If you want the highest possible rate, you will likely need to use an online bank that accepts custodial accounts.

Interest rates, minimum balances, and account fees

Interest rates on custodial high yield accounts vary by bank and change frequently. When you compare options, check whether the bank quotes the same rate for custodial accounts as it does for adult accounts. Some banks pay a lower rate on custodial accounts, or they may require a higher minimum balance to earn the advertised rate.

Minimum balance requirements for custodial accounts range from zero to several thousand dollars, depending on the bank. Some banks waive the minimum if you set up automatic deposits. Others require a minimum balance to earn any interest at all, meaning a small account might sit at zero percent.

Most online banks do not charge monthly fees on savings accounts, including custodial ones. However, some traditional banks do charge maintenance fees on minor accounts. Check the fee schedule before opening an account, and ask whether the fee applies to custodial accounts specifically.

What happens when the minor turns 18

When the minor reaches the age of majority — 18 in most states, 21 in a few — the custodial account converts to a standard account in the minor's name alone. The custodian's name is removed, and the minor gains full control. This conversion is usually automatic; the bank handles it without requiring a new process.

The minor should expect to receive notice from the bank a few weeks before or after the conversion date. They may need to update their contact information or set up online access if they have not already done so. The account number and the money in it stay the same.

If the custodian and the minor disagree about what should happen to the money at that point, the custodian has no legal claim to it. The money belongs to the minor once the account converts. This is an important reason to discuss savings goals and expectations with a minor before opening a custodial account.

Alternatives if no high yield custodial account is available

If you cannot find a bank offering custodial high yield savings, you have other options. A regular custodial savings account at an online bank will still pay more interest than a traditional bank account, even if it is not labeled "high yield." The difference between a 4.5 percent rate and a 0.01 percent rate matters far more than whether the account has a specific label.

A Uniform Transfers to Minors Act (UTMA) account or Uniform Gifts to Minors Act (UGMA) account is another structure some banks offer. These are similar to custodial accounts but have slightly different legal rules about what happens to the money and when the minor gains control. Not all banks offer them, and they work the same way as custodial accounts from a practical standpoint.

If the minor is old enough and the bank allows it, a teen checking account with a debit card might be a better fit than a savings account. Some banks let teens age 13 and up open accounts with parental consent, and a few of these accounts earn interest, though usually not at high yield rates.

Tax implications of custodial high yield accounts

Interest earned in a custodial account is taxed as the minor's income, not the custodian's. This can be a significant advantage. For 2024, a dependent minor can earn up to a certain amount of unearned income (interest, dividends) before owing federal income tax. The exact threshold changes yearly, so check the IRS website or ask a tax professional for the current year's limit.

If the minor's total income stays below that threshold, no federal tax is owed on the account interest. If it exceeds the threshold, the excess is taxed at the minor's rate, which is usually lower than the custodian's rate. This is one reason custodial accounts are popular for saving money intended for a minor's future.

The custodian does not report the interest on their own tax return. The bank will send a 1099-INT form to the minor's Social Security number if interest exceeds $10 in a year. The custodian or the minor (or both, depending on who files taxes) will need this form at tax time.

Frequently Asked Questions

Can a teenager open a high yield savings account without a parent?

No. Banks require an adult to open and own the account. A teen cannot open any savings account — high yield or otherwise — without a parent or guardian as a co-owner. Once the teen turns 18, they can open their own account without parental permission.

What is the difference between a custodial account and a regular savings account?

The only difference is who controls it. In a custodial account, the parent or guardian controls deposits and withdrawals until the minor turns 18. In a regular account, the account holder controls it. The interest rate, fees, and bank are otherwise the same.

Can the custodian take money out of the account for their own use?

Legally, no. Money in a custodial account belongs to the minor, not the custodian. The custodian can withdraw money only for the minor's benefit — education, medical care, living expenses, and similar purposes. Taking money for personal use is a breach of the custodian's legal duty.

Do I need to close the custodial account when my child turns 18?

No. The account automatically converts to a standard account in your child's name. You do not need to do anything unless you want to. Your child will then have full control and can keep the account, move the money elsewhere, or close it.

What happens if the custodian dies before the minor turns 18?

The account does not automatically pass to another adult. The minor's other parent, a guardian, or the executor of the custodian's estate will need to take legal steps to manage the account. This is a reason to name a backup custodian or discuss the account in your will.