Opening a bank account in your child’s name is a good idea on many fronts. It can provide an easy way to save towards university expenses, offer bonus interest and help to teach your child about saving early in life. However, not all bank account for babies are the same, so it pays to shop around.
|Tangerine Children’s Savings Account|
The age of majority in your province:
18 yrs. old in AB, MB, ON, PE, QC, SK
19 yrs. old in BC, NB, NL, YT, NU, NT
|CIBC Advantage for Youth||18||$0||Free unlimited||0.15%|
|Scotiabank Getting There Savings Account||18||$0||Free unlimited||Balance between $0 – $499 = 0.05%|
Balance over $500 = 0.10%
|BMO Premium Rate Savings Account||18||free with $0 Plus Plan for kids and teens||30 free per month|
$1.25 each after
|EQ Bank Savings Plus Account|
(general savings account for all ages)
*Rates and account information are current as of May 7, 2019
Some banks and credit unions provide accounts especially for children. You can open an account in your baby’s name, provided you and your baby meet some basic eligibility criteria.
A typical baby account provides interest and won’t charge ongoing fees. However, they may come with some depository requirements along with restrictions on withdrawals.
You’ll need to list both your name and the child’s name on the account, but some accounts will let you sign full ownership of the account over when the child is legally an adult — 18 or 19 in most provinces and territories. You can open an account online or at a bank branch, and you’ll need to provide personal information for yourself and the baby. This can include social insurance numbers (SIN), an address and phone number and a photo ID or birth certificate. Your email address and proof of residency may also be required.
Can I open an account before my child is born?
No. You’ll need to provide a social insurance number (SIN) and/or birth certificate, which means you can’t open an account for an unborn baby. But some banks will let you open an account in your name and add the baby after he or she is born.
When choosing a new account, compare:
- Requirements for opening the account. This includes minimum deposit amounts and any necessary information, like a social insurance number (SIN) or birth certificate.
- Ongoing fees. Some accounts will charge ongoing monthly or yearly fees, though you may be able to waive them by meeting depository requirements or maintaining a minimum monthly balance.
- The interest rate. Look at both the interest rate and how often it compounds. While credit unions and online banks tend to offer better interest rates than mainstream banks, that’s not always the case.
- Location of branches. It’s important to note how close a branch is to your residence when opening a bank account for a child. While online banking might be perfect for adults, banks give children limited access to these platforms. As your child grows older, it may become important o be able to visit a branch to make deposits and withdrawals.
- Account type. Some accounts will let your child withdraw money as he or she grows up, while others won’t allow withdrawals until the child reaches adulthood.
Bank account options for minors include:
- Savings accounts. With a traditional savings account, the minor will be able to add and withdraw funds before they’re 18. This can be a great way to teach kids to save up for special purchases.
- GICs. Guaranteed Investment Certificates can be gifted to a child if you list yourself as the account custodian. They tend to earn higher interest rates than savings accounts, and the guaranteed rate means you’ll know exactly how much your gift will be worth when it matures. Your child will need to wait until they’re the age of majority before they can access the funds. Note that you will have to report income earned from investments like GICs on your tax return.
- RESPs. Registered Education Savings Plans let you set aside money to be invested for your child’s future education (see the Government of Canada’s website for more information). The government matches your contributions up to a yearly maximum. A lifetime total of up to $50,000 can be saved per beneficiary before you begin being taxed on your contributions.
When your child is ready to go to school, he or she can make withdrawals from the RESP. However if your child decides not to go to school, the money can be transferred to another child or withdrawn. If it’s withdrawn, the money will be heavily taxed. There are 3 different types of RESPs to choose from:
- Family plan. This plan lets you name more than one child to the account, if you want to. The benefit of doing this is that it allows children to share savings among themselves when it comes time to go to school. Family plans can be set up for beneficiaries who are your children, stepchildren, grandchildren, brothers or sisters. Beneficiaries can be related by both blood and adoption.
- Individual (non-family) plan. This account lets you save for just one person, and this person does not have to be related to you. You can open an individual RESP for a child, yourself or for another adult.
- Group plan. In a group plan, your savings are combined with the savings of other people who are setting aside for other beneficiaries. You can only name one child to the account, and withdrawals are made based on the total amount in the account. The specific amount that each child gets is based on how many children/beneficiaries of the same age who are in school during the same year.
Children can be required to pay income tax. If your child’s income from all sources (such as investments and any form of employment) is above the income thresholds set by the federal and provincial governments each year, then he or she will owe income tax to the CRA. But if your child’s income falls below this threshold, he or she won’t owe any income tax.
Read up on the tax implications of opening a kids bank account
Starting a savings account early lets your money grow as your child grows. Whether you want to open a savings account, GIC or RESP depends on your savings goals and the amount of access you want the child to have. No matter which option you choose, compare financial institutions to make sure you’re getting the account that will offer the most growth.
Want to learn more about savings accounts including which features you should look for, what fees to expect and where to find the best account for you? Check out our detailed guide to savings accounts.