Many parents consider adding their child’s name to their bank account as a way to save for their child’s future or to make it easier for their child to manage their finances. However, there are a number of potential consequences to consider before doing so.
Potential Consequences of Adding a Child’s Name to Your Bank Account
- The money in your account could be diverted to unintended parties. If your child is sued, gets divorced, or has a judgment against them, the money in the account could be used to satisfy those debts.
- Your child could lose eligibility for public funds. If your child ever needs public assistance, such as Medicaid, the account will be counted as an available resource and may make them ineligible.
- Your child could spend the money without your permission. Because your child’s name is on the account, they would have the right to withdraw money without your consent.
- The money in your account could become part of your child’s estate. If your child dies before you, the money in the account could be distributed according to the terms of their will, rather than yours.
Alternatives to Adding a Child’s Name to Your Bank Account
There are a number of other ways to save for your child’s future without adding their name to your bank account. These include:
- Opening a custodial account. A custodial account is a type of savings account that is held in the name of a minor child. The parent or guardian manages the account until the child reaches the age of majority.
- Purchasing a savings bond. Savings bonds are a type of investment that is backed by the U.S. government. They are a safe and reliable way to save for your child’s future.
- Investing in a 529 plan. A 529 plan is a tax-advantaged savings plan that can be used to pay for qualified education expenses.
Adding your child’s name to your bank account may seem like a harmless way to save for their future or to make it easier for them to manage their finances. However, there are a number of potential consequences to consider before doing so. It is important to weigh the risks and benefits carefully before making a decision.
Frequently Asked Questions
Can I add my child’s name to my bank account without giving them access to the money?
No. If you add your child’s name to your bank account, they will have the same rights to the money as you do. This means that they could withdraw money without your permission or spend it on whatever they want.
What is the best way to save for my child’s future?
There are a number of different ways to save for your child’s future. Some popular options include opening a custodial account, purchasing a savings bond, or investing in a 529 plan.
What are the risks of adding my child’s name to my bank account?
There are a number of potential risks to adding your child’s name to your bank account. These include the risk that the money could be diverted to unintended parties, that your child could lose eligibility for public funds, that your child could spend the money without your permission, or that the money could become part of your child’s estate.
Should You Add A Child As A Signer On Your Bank Account?
FAQ
Can you put a child’s name on a savings account?
Can I put money in my child’s name?
Does my child savings affect my benefits?
Do I have to pay taxes on my child savings account interest?
Can a child open a savings account in their own name?
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. Many parents choose to open their children’s educational savings accounts in the names of the children rather than in their own names.
Can a parent use a child’s savings account?
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. If you’re listed as custodian on your child’s savings account, you have access to the money in that account.
Should you consider kids savings accounts?
Let’s review some things to be aware of when considering kids savings accounts. Many traditional banks and online banks and credit unions offer child, or youth, “depository” savings accounts for general use. This is a savings account you oversee but that your child can use to make both deposits and withdrawals.
Can a child convert a savings account to a regular account?
Most banks will automatically convert a child’s savings account to a regular savings account when the child turns 18. Depending on your bank, there may be different fees, additional paperwork to sign or other decisions for your child to make.