Custodial Account: Everything Parents Need to Know
When it comes to saving for our children in Nigeria and across Africa, most parents still rely on informal methods—keeping cash at home, joining a contribution group (ajo, esusu), or simply “keeping the money with a friend” until it’s needed. While these methods can work, they also come with risks—money can be lost, spent accidentally, or lose value over time.
A custodial account is a simple, safer alternative that many parents don’t know about.
What is a Custodial Account?
A custodial account is simply a bank or investment account you open for your child, but you manage it until they’re old enough to take over. It’s sometimes called a “minor account” or “trust account.” The key idea is that the money belongs to your child—it’s in their name—but you act as the “custodian” until they reach the legal age (often 18).
You can deposit money at any time—whether it’s pocket money, a percentage of your salary you’ve decided to save for them, or gifts from relatives. Some parents choose to set up a standing order so a fixed amount goes in every month without fail.
The money can be kept in a savings account that earns interest, or, if you’re using a financial partner that offers it, placed in investments like mutual funds or government bonds for potentially higher returns. Withdrawals are usually restricted to expenses that benefit the child—such as school fees, extracurricular activities, or other agreed purposes.
It’s important to ask your financial partner about the specific rules. For example, some financial institutions will not allow you to withdraw without showing proof that it’s for the child’s benefit, while others leave the decision entirely to the custodian.
Why Consider a Custodial Account for Your Child
It builds discipline: The money is separate from your personal account, so you’re less likely to “borrow” from it.
It gives your child a head start: By the time they’re an adult, they’ll already have money saved or invested, instead of starting from zero.
It teaches financial responsibility: When they eventually take over the account, they’ll see firsthand how consistent saving and investing works.
It can fund big milestones: Whether it’s university tuition, starting a small business, or even buying their first car, the account can help cover large expenses without sudden financial strain on you.
It’s a safe place for gifts: Instead of giving children cash they might quickly spend, relatives can contribute directly to their future.
For example, imagine putting aside just ₦5,000 a month from the time your child is born. By the time they turn 18—without even counting interest—you’d have saved over ₦1 million for them. Add interest or investment returns, and the amount could be significantly higher.
Things to Watch Out For
Before you rush to open a custodial account, it’s worth knowing the potential pitfalls:
Bank charges and low interest rates: Some savings accounts in Nigeria offer very low returns, and charges can eat into the balance. Always compare options.
Withdrawal restrictions: Some banks make it hard to access the money before your child reaches a certain age. While this protects the funds, it could be an issue if you urgently need it for the child.
Currency depreciation: In countries with high inflation, the money’s value can shrink over time if it’s only in a regular savings account. Consider investment options if available.
Custodian responsibility: The money legally belongs to the child—it’s not a backup emergency fund for you as a parent.
Rules vary by bank: Not all custodial accounts are the same. Ask about age limits, access rules, interest rates, and fees before committing.
How to Set One Up
Opening a custodial account is usually straightforward, but the process can differ slightly depending on the financial institution or country. Here’s the typical flow:
Pick a financial institution: Look for one that offers custodial or trust accounts specifically for minors. Compare their interest rates, fees, and withdrawal rules.
Gather your documents:
Your valid ID (international passport, national ID, driver’s licence, or voter’s card)
Your child’s birth certificate
Proof of address (like a utility bill)
Passport photographs (for you and sometimes your child)
Fill out the application: This can often be done at a branch, and some may offer an online start.
Fund the account: Decide on your opening deposit. Some institutions have a minimum balance requirement, while others let you start small and grow over time.
Ask about extras: Some institutions offer investment-linked custodial accounts where part of the money can grow in mutual funds or fixed deposits—helpful in places with high inflation.
It’s best to take your time here, ask questions, and be clear on the terms before doing anything.
How to Involve Your Child
A custodial account isn’t just about saving money; it’s also an opportunity to teach your child how money works. Here’s how to make them part of the journey:
Tell them about the account: Let them know it’s for their future, whether that’s university, starting a business, or a big life goal.
Show them the balance: Once in a while, review the account statement together so they can see how deposits and interest add up over time.
Celebrate milestones: If the account hits a certain amount, acknowledge it. Even something simple like “Your savings just hit ₦100,000!” will make them proud and appreciate the value of savings.
Encourage contributions: If they earn money from chores, gifts, or small jobs, suggest putting a small portion into their account.
Let them set a dream goal: This gives them a tangible reason to value the account, whether it’s studying abroad, buying equipment for a business, or even funding part of their university education.
When kids feel like the account is “theirs,” they’re more likely to appreciate it and carry the habit of saving into adulthood.
Start Today
A custodial account allows you to save and grow funds in their name while teaching them the value of planning ahead. For parents, it’s one of the smartest ways to prepare for big expenses like education, business capital, or important milestones without putting pressure on your future self.
The earlier you start, the more time the money has to grow—and the more your child can learn along the way.
If you’ve been looking for a practical way to secure your child’s financial future while also building their money habits, now is the time to take action.
Create a custodial account for your child today on the Earlybean app and earn 10% interest while you save for their future.