Smart Ways to Gift Money to Children

Ashwin Honawar

Updated on:

gifting money to children smart ideas

There are two ways to gift money to children. One of them is obvious: we give them some cash or a gift voucher to buy something. The other is investing in kids and their future.

We gift money to children for several reasons. Firstly, we give cash or gift coupons on birthdays, Christmas and New Year or other festivals and occasions. Secondly, we give them money as part of encouragement, when they do something that makes us happy. And finally, we gift money to our kids to ensure they have a good, secure future.

In this article, I will be speaking about smart ways to gift money to children. By smart ways, I mean gifting money that proves useful to them in future and isn’t wasted. Such money gifts help us and our kids.

Interested in knowing these smart ways to gift money to children? Continue reading.

Gifting Money to Children: Smart Ways

As a matter of fact, gifting money to children depends a lot on their age at the time and, of course, their personal financial situation and that of their household. It means considering a lot of things to make sure that the money really matters and makes a difference in the lives of children.

Here are some smart ways to gift money to children that you could consider.

1. Open a Kid’s Bank Account

Open a Kid’s Bank Account

Several banks and credit unions across the US have special savings accounts that parents can open for their children. Some of these accounts come with zero monthly or annual maintenance charges and other fees. They can be opened in the name of your kid without any initial deposit or by funding the account with as low as $50.

Opening a savings account for your kid has several advantages. It teaches them the basics of banking from a young age while encouraging the savings habit. A lot of such savings accounts come with debit cards and checks that your kid could use. Additionally, some banks have special offers and promos to promote the savings habit among children.

2. 529 Plan

529 Plan

There are two types of 529 Plans available in the US. These plans are run by various states and are tax-advantaged. The first type of a 529 Plan is an education savings plan and second, the prepaid tuition plan. You can check online for various 529 Plans and other variants available in your state.

For example, the CollegeInvest plan available in Colorado offers $100 as a free gift for every child born or adopted in the state after January 1, 2020. It comes with the CollegeInvest Matching Grants Program that is specifically designed to help lower-income families save for the college education of their children.


UGMA means Uniform Gift to Minors Act. This is useful if you’re going to give a large amount of money to your minor children. You can stash the money under UGMA and your children can access it when they’re of age. Rules and regulations for the UGMA differ according to each state. It is also known as the Uniform Transfer of Money Act.

The UGMA and UTMA allow you to save cash or assets for kids till they’re adults. However, these aren’t tax-advantaged plans. Therefore, speak with your financial advisor or bank about setting up a trust with the money that you want to gift to your children and find the best options in your state.

4. Certificate of Deposit

Certificate of Deposit

A Certificate of Deposit or CD account is available in different types from various banks, credit unions and other financial institutions in the US. Broadly speaking, a CD account means you deposit some money with the bank or credit union or financial institution that offers the service, for a fixed rate of interest.

Depending on the plan you invest upon, the bank pays you the money with interest, after the investing period ends. You can open a CD in the name of your kid, but in some cases, parental custody of the account is needed. Check with your bank or credit union for the CD plan that suits you the best.

5. Credit Cards for Students

Credit Cards for Students

Bank of America, US Bank and lots of other banks, credit unions and financial institutions provide credit cards for students.

In some cases, such a credit card is issued by keeping a cash deposit at the bank. These are known as secured credit cards. That’s because the bank, credit union or issuer will forfeit the deposit if the student fails to pay dues on time.

A secured credit card is a superb way to gift money to children that’re at college. It helps them build a credit score and teaches the importance of paying dues on time.

A secured credit card usually has a low limit, which means children can’t overspend and get into financial problems. Check with your bank or credit union about secured credit card offers for children.

More Smart Ways t0 Gift Cash to Kids

While the five ways that I discuss briefly above are the best and smart ways to gift money to children, here’re some other ways too. However, these won’t serve any long term purposes and can be used only as encouragement for the child.

6. Piggy Bank

Piggy Bank

Gift your child the traditional Piggy Bank- or that pig shaped money box. It works wonders with younger kids since they love to drop coins and notes in the box. Give your child some money to drop in the box daily or regularly, as rewards for something they did.

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7. Cash Rewards

Cash Rewards

This is a simple trick that always works. Reward your child with some cash after they complete some task you assign. This is a wonderful way to train your child about the importance of working and earning an income. It also teaches the savings habit, with some training from the parent.


Consider your financial situation before gifting money to your children. Some of these ways that I described above require financial commitments or frequent payments.

Also, consider fees and other charges before using these ways. Consulting your financial adviser can help you in finding the best ways to gift money to children.

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