Citizens Bank / Charter One CollegeSaver Account: Potential 6% Annual Return (For Kids, Limited States)

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Citizens Bank and Charter One bank have an interesting CollegeSaver bank account for those with children. However, it is only open to residents of certain states in the Eastern and Northeastern US (CT, DE, IL, IN, KY, MA, MI, NH, NJ, NY, OH, PA, RI, VT; enter zip code to verify). Thanks to reader Justin for the tip.

You must open a bank account before the child’s 12th birthday with a minimum amount, and then save a minimum amount every month until the child is 18. (You’re allowed to miss one payment per year.) If you satisfy the requirements, you’ll get a $1000 bonus on the 18th birthday. Here are the details:

The best case scenario would be if your kid is just under 12 years old right now. That’s still a 6-year commitment, but if you contribute the minimums then with the bonus that’s a 6.40% annual rate of return on your money (per savings calculator). Since the bonus is constant, the rate of return drops the younger your kid is (longer contribution period). At just over 6 years old, you’d be locked in for 12 years and your annualized return would be 1.9%.

I would say if your child is 10-12 years old and you have patience, this is not a bad deal. But as this is not a 529, you will owe taxes on the interest. However, the upside is that you don’t have to use the funds to pay for college. The account is opened as a custodial account (UTMA), and thus the account can be opened for the child by anyone. However, depending on the state, the child will get control of the account at 18 or 21.

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  1. This bank has a LOT of hidden fees…..beware!!

    And I mean a LOT! They are sneaky too..

  2. So, for my newborn, this doesn’t seem to be a great deal – with my state (MA) at %0.25 APY – I’d be better off putting the money in a 529 that has a higher rate over those 18 years, If i’m understanding this correctly?

  3. “Account must be opened before child’s 6th birthday.”

  4. Hmm.. for me it says

    “Account must be opened before child’s 12th birthday.”

    It’s possible the deal is different depending on your zip code. I don’t actually live in an eligible area, so I just chose zip code 10001.

  5. @Jennifer – Rates can change a lot over 18 years, in my opinion a 529 would offer more flexibility in investment options and opportunity for larger return over such a long time period, especially when you count in the tax deferred feature.

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