I have two-year-old twins who have gotten some birthday money and I'm wondering what to do with it. For their first few monetary gifts we just tucked it in an envelope, but now it's accumulating and I'm wondering what to do with it. When is it a good time to get them a savings account (we are saving separately for a college fund)?


Paddy Hirsch Jun 17, 2013 Senior Editor, Marketplace
Boy, your twins are lucky to have such generous and forward-thinking parents! My grandma did me a similar favor, leaving me a thousand pounds in a post office savings account when I was a kid. It taught me some great lessons about saving - or, rather, what happens when you don't save: I blew most of it on vinyl. Which I since have scratched. Or broken. Or lost! And I remember that sick feeling I had when the money was all gone. Never again!

Anyway, enough about me. There are all sorts of places you can put your kids' money. A quick web search will show you that pretty much every bank and credit union out there offers some kind of savings scheme for children. So you could open accounts for them right now, and, indeed, there's no time like the present.

But there are a couple of barriers to your kids' entry into the financial services marketplace. For one thing, even if they could write, they can't sign papers, because they're not yet 18. So you have to open the accounts for them. You can put their names on the accounts, but you remain the legal custodian. So you're responsible. You'll need to show the bank the kids' birth certificates and social security numbers to open this kind of account, by the way, so be prepared.

Do you want the kids to be able to move money in and out of the accounts? Do you want the accounts to earn interest? Do you want to be able to visit a physical branch with the kids, so that they can learn how banks work? Or do you want to be able to do everything online? Depending on the kind of account you choose, you might be able to find one that waives fees. In some cases, just setting up some kind of direct debit transfer of funds from your checking account to theirs might be enough to escape fees. But as Greg McBride of Bankrate says, regular infusions of cash, even just $1 a month, are a great way to build funds. It's also a great way to teach lessons about compounding.

So you've got plenty of options - and a few decisions to make. But whatever you do, make sure the bank is FDIC insured!