We just had our first child and we figure it's not too early to start saving for college. Can we set up a savings account in the baby's name?
Yes, if your state law and your bank allow it. Not all do. There are some potential downsides to doing so, however. First of all, if the baby's the only owner, the baby doesn't have the ability to make withdrawals, so in the event there's an emergency and the funds are needed, you're not going to be able to access them. Second, most bankers have seen some sticky situations with accounts owned by children. For example, the kid knows there's a deposit account in his name. He has seen the bank statements over the years. The day he turns sixteen, he asks for a motorcycle. His parents decline his request. The next thing you know, he's standing in the teller line at the bank, asking to make a withdrawal from his account. Not a good thing.
One alternative is to instead set up the account under the Uniform Transfers to Minors Act. The child will be considered the owner of the funds but will not have a legal right to access them. The funds can be accessed by an adult who signs on the account, referred to as the custodian. The adult custodian must utilize the funds only for the use and benefit of the child.
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Yes, if your state law and your bank allow it. Not all do. There are some potential downsides to doing so, however. First of all, if the baby's the only owner, the baby doesn't have the ability to make 