How to open a savings account for a child?

Discover steps to open a savings account for your child. Start their financial journey early with easy-to-follow guidance.
How to open a savings account for a child
3 min

Opening a kid’s savings account is not very different from opening a standard account. You must submit the necessary documents showing the applicant’s age, identity, and address proofs, and you may also have to make a minimum deposit. Once the account is opened, the parent will essentially have control over it until the child reaches a certain age.

Key takeaways

  • Most children’s savings accounts involve no monthly fees.
  • Setting up a children's savings account promotes financial literacy from an early age.
  • Tailored benefits are typically offered in savings plans such as children’s savings accounts and senior citizens’ savings schemes vs. FD, which primarily focuses on accruing interest with a few other benefits.

What is a kid’s savings account

A kid’s savings account is designed for kids under the age of 18, where the parent and child act as joint account holders. A savings account gives your child a glimpse into how banks and financial institutions work and offers them a place to save their allowance. It also helps them in growing their money with interest.

Types of child savings accounts

  • Custodial accounts are a type of account where you are the custodian until the child becomes an adult.
  • Joint accounts are where you can share an account with your child as a joint account owner. The majority of kids’ savings accounts are set up as joint accounts.
  • An educational savings account is a type of child savings account that offers tax benefits when saving for college or other educational expenses.

Should you choose a child savings account or a custodial account

When choosing between a child savings account and a custodial account, it is essential to evaluate the differences. The choice can depend on various factors, such as the child's age, financial needs, and your preference for control.

1. Child savings account:

  • Parents maintain control over the account until the child reaches a certain age
  • Offers child-friendly features and incentives to encourage savings

2. Custodial account:

  • Account is owned by the child but is managed by a custodian until the child reaches adulthood
  • Allows for more diverse investment options beyond traditional savings, including stocks, bonds, and mutual funds
  • May offer tax advantages

Also read: Fixed deposit vs. savings account

What are your goals for your kid’s savings account

When opening a kid’s savings account, parents may have various types of goals in mind:

  • Foster financial literacy from an early age
  • Teach the importance of saving and budgeting
  • Provide funds for future educational expenses
  • Start building a financial safety net for the child's future

Should you use a kid’s savings account to save for college

While a child savings account promotes financial literacy and responsible money management, it may not be the most effective option for college funds due to the following reasons:

  1. Children’s savings accounts in India provide modest interest rates.
  2. Unlike PPF or education loans, savings in a regular kid's savings account may not provide tax benefits for education expenses.
  3. Without such benefits, the growth potential of savings in a kid's account may be limited, potentially falling short of funds required for college.

What interest rate can you get on a children’s savings account

Interest rates on children's savings accounts in India can vary based on the bank and the type of account. The best children’s savings accounts generally offer competitive interest rates ranging from around 3% to 5% per annum.

What features should you look for in a kids’ savings account

  • Banks can offer an automatic savings deposit option that allows the parent to transfer a certain amount into a child’s account each month.
  • Consider exploring alternatives to a savings account, such as specialised savings accounts with educational resources or custodial accounts for diversified investments.
  • Some banks offer ATM cards to let children withdraw cash from their savings accounts.

What are the fees and requirements of a children’s savings account

Kids’ savings accounts tend to be straightforward, but some banks may have different requirements:

  • Minimum opening deposit: Some banks offer accounts with no initial deposit requirement, whereas others may require a nominal initial deposit ranging from Rs. 100 to Rs. 1,000.
  • Minimum daily balance: While most children’s savings accounts do not require the child to keep any money in the account, some may require a minimum daily balance to avoid a fee.
  • Monthly maintenance fees: While the majority of children's savings accounts in India typically waive monthly maintenance fees, certain banks may impose such charges.

What documents do you need to open a kid’s savings account

To open a children's savings account in India, you will require the following documents:

  • Child's birth certificate
  • Identity proof of the child (school ID) and the parent (Aadhaar card, PAN Card, or passport)
  • Address proof
  • Child’s photograph

What is the minimum age to open a bank account

In India, many banks offer specialised child savings accounts from birth, managed by parents until the child reaches the ages of 10–18 years.

What happens to a kid’s savings account when the child reaches age 18

Banks often automatically change a child savings account to a regular savings account when the child turns 18. This shift grants them unrestricted access to the funds, allowing them to manage the account independently. Depending on the bank, additional paperwork and fees may apply.

Bottom Line

Setting up a children's savings account is a proactive step towards instilling responsible money management habits. While banks typically do not pay high yields on these accounts, they can still be a meaningful tool to start your child on a responsible financial path from an early age.

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Frequently asked questions

Do I have to pay taxes on the interest my child’s savings account earns?
Under section 64(1A) of the Income Tax Act, any income that accrues or is paid to a minor is clubbed with the income of the higher-earning parent, and the parent is taxed as though it were their own income. However, a tax exemption can be claimed of Rs. 1,500 or the minor’s income amount, whichever is lesser.
What kind of savings account should I open for my child?

Banks typically provide two types of minor savings accounts—one for children under the age of 10 years, which is jointly operated with a parent or guardian, and one for children between 10 and 18 years, which is operated by the child individually.

How do I invest for my kids?

When investing for their children, parents may reserve funds for their minors in their investment accounts or invest under the minor’s name for more focused investment. Many parents typically prefer setting up a good investment for their children early on.

Can I open a 401(k) for my child?

Minors cannot open a 401(k) under their own name. Instead of a 401(k), which is tied to employment, an IRA can be set up for a minor who is not employed. For this, an adult essentially serves as a custodian and maintains control for decisions on investments, contributions, and distributions.

What bank account can I open for my child?
Many banks offer minor savings accounts with various special features. For instance, ICICI Bank’s Young Stars Savings Account is a great savings account that helps parents easily plan their children's finances. Axis Bank Future Stars Savings Account offers services such as personalised debit cards for children above 10 years.
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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.