How to Open a Certificate of Deposit for a Minor


Although there are a few limitations and drawbacks, buying a certificate of deposit (CD) is easy and one of the best gifts you can give at any time of year. It has a cash value, which appeals to minors as much as to everyone else. Even better, for many minors who are financially illiterate, a certificate of deposit offers a cheap and elementary introduction into how finance operates. Despite low interest yields and withdrawal restrictions, there's no simpler object lesson in the value of money over time. Certificates of deposit can be inexpensive. You can find them at some banks for as little as $10.

Things You'll Need

  • Identification for yourself
  • Identification for the minor
  • Money to invest

Discuss your plan to buy a certificate of deposit with the minor who is to receive it. Explain that a certificate of deposit is an agreement to lend a certain amount of money to a bank for a certain amount of interest in return. Explain that the rates of return (how much the certificates earn) are low but completely secure. Also explain why the bank pays interest on a certificate of deposit: because the bank, in turn, lends the money to other people at an even higher rate of return.

Research certificate of deposit yields (interest rates), online so you'll have a good idea of the current fair market yield is..

Telephone your bank and explain that you want to buy a certificate of deposit for a minor. Procedures may vary from bank to bank or state to state. In general it will involve visiting the bank, filling out a form and paying for the certificate of deposit. At some banks it's also possible to buy CDs online.

Visit the bank with the minor, where you'll talk to a salesperson who will explain the choices of certificates of deposit the bank offers. The most important variables (especially for CDs $1,000 and below) will be the length of time before the CD matures and the rate of interest paid. Note that certificates of deposit are not liquid assets. That means once you make the deposit you can't withdraw the money until after the specified amount of time (called the maturity date) has passed. Together, you and the minor can discuss and evaluate the options in order to choose a certificate of deposit together.

Fill out the forms and make the payment.

Tips & Warnings

  • Buy certificates of deposit only from a bank. Brokerages often charge fees; banks almost never do.
  • If you don't have a bank or a relationship with a bank, telephone a few banks with branches near you and choose the one you like the best based on terms of CDs available and the feel you get for their customer service.

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