Many people see cash presents for children as thoughtless gifts since you merely place money into an envelope and hand it over, but this doesn’t have to be the case. On the contrary, giving money as a gift can be a meaningful gesture with a lot of benefits.
Unlike many traditional gifts that are limited in their usefulness (like clothes that wear out or toys that break), money gives the child the flexibility to use it as they like, and this freedom of choice is a gift in itself. Besides, the child can set the money you give them aside for significant milestones in their life and use it to support both bigger and smaller financial goals in the future.
In this article, you’ll learn the best ways to gift money to a child through meaningful gestures that go beyond monetary value.
The Purpose of Giving Kids Money
If you’re thinking about gifting money to your child but are unsure how to go about it, you should first consider what you’re trying to achieve with that gift. Do you want to teach your child about finances or investing, assist with their savings, or even fund a future goal like college or retirement?
The option you pick solely depends on whether you’re aiming for a short- or long-term outcome. For example, cash or a gift card can instantly put a smile on your child’s face and allow them to choose their own gift. But if you’re looking for a gift that will benefit them further down the line, a 529 Plan or a Roth IRA would be excellent choices.
Ideas on How To Gift Money to a Child
As you think about the purpose of your gift, having a few ideas in mind can help steer you in the right direction. These six options can inspire some creativity and help surprise your child—and some might even help you teach them about saving and long-term investing:
- Give your child cash or a gift card
- Get them a prepaid card
- Invest in their college plan
- Set up a Uniform Gifts to Minors Act (UGMA) account
- Start a Roth IRA for them
- Start a savings account with them
Bear in mind that taxes may apply when gifting larger sums of money.
Cash and Gift Cards
While giving cash to your child may seem like a lazy or thoughtless option, it doesn’t have to be that way. There are numerous creative ways to gift cash to your child, and you can even make a game out of it. Plus, you know your child best—if you’re aware they’ve been saving to buy a more expensive item, giving them cash to help achieve their goal is bound to put a smile on their face.
Gift cards are another excellent option to gift money, and you won’t have to rack your brain to find a present. For example, if your child loves gaming, you can put your gift money on a gaming-related gift card, such as a Steam or Fortnite gift card. This way, they can get themselves the item they’ve been eyeing for months.
Prepaid Card
If you want to give your children a sense of ownership and financial independence, a prepaid debit card is a perfect gift option. These cards work the same as regular debit cards, except they’re not tied to bank account funds and are available to children as young as six.
The way these cards work is that you preload the card with money that your child can use to make in-store or online purchases or withdraw cash from ATMs. Prepaid cards also come with parental controls, options for monitoring your child’s spending, card protection, and additional features designed to teach children about money management.
UGMA
If you want to surprise your child with money but still have some insight into what they’re using it for, the Uniform Gifts to Minors Act (UGMA) will be a great choice. UGMA is a type of custodial account that’s used to hold and protect the financial assets of a child, and all deposits to a UGMA account are irrevocable.
Contributions to the UGMA account can come from anyone, regardless of their relation to the child, and are made with after-tax dollars so the child doesn’t receive a tax deduction. While the account-generated earnings aren’t tax-sheltered, they’re taxed at the lower kiddie tax rate, up to a certain amount.
Although UGMA assets are typically used for a child’s education, withdrawals can be made for anything without any penalties, allowing your child more freedom with their gift money.
Additionally, as the custodian, you can buy the following on behalf of your child:
- Stocks
- Bonds
- Mutual funds
Once the child becomes an adult, they gain full access to the account and can use it however they see fit.
529 College Savings Plan
One of the go-to options parents choose to indirectly gift money to their children is a 529 college plan. This savings plan is designed to help with paying for education, and it comes in two types:
- Education savings plan
- Prepaid tuition plan
Education saving plans allow your investments to grow tax-deferred, and withdrawals are tax-free if they’re used for qualified educational expenses, such as tuition and fees, books, supplies, room and board, etc.
Meanwhile, prepaid tuition plans give you the ability to lock in today’s tuition rates for future attendance at your chosen universities and colleges. This allows you to potentially secure a lower cost for your child’s college education in the future.
Another benefit of the 592 plans is that if the fund has been open for at least 15 years, you can roll over up to $35,000 of unused funds to a Roth IRA account.
Roth IRA
Apart from turning your money gift into an investment for the near future, you can also consider one for the long haul. A Roth Individual Retirement Account (IRA) allows you to contribute after-tax dollars toward your child’s retirement fund. The money you invest in a Roth IRA grows tax-free, and your child can withdraw the contributions after the age of 59½, assuming the account was open for more than five years.
Unlike traditional IRAs and 401(k)s, the Roth IRA gives you more freedom, considering there’s no time limit on how long the account is open and no required minimum distributions.
Savings Account for Children
Another way to gift money to a child is by opening a savings account with them as a joint account owner. Children’s savings accounts come with different perks, which may vary from one bank to another. Here are some of them:
- There are no account fees
- There’s no required balance for opening the account
- Some banks provide mobile apps so children can easily access their account
- Some accounts have online tools to help the child boost their financial education
Saving accounts are an excellent way to help your children learn about budgeting and handling finances. This can help them develop a habit of saving money they’ve earned through an allowance, chores, or summer jobs.
Credit Building—A Gift That Keeps On Giving
Since the CARD Act of 2009 prevents minors from obtaining financial products independently, most children and young adults can’t start building credit on their own before turning 21. If you’re still unsure what the best way to gift money to a child is, this just might make your decision easier. By building your child’s credit early in life, you can potentially save your child up to $200,000 throughout their adulthood—which is the ultimate gift.
Having good credit will help your child:
- Get lower interest rates
- Obtain loans faster
- Purchase a car
- Rent an apartment/buy a house
- Get better job opportunities (some employers perform credit checks)
If you want to give your child the gift of a stable financial future by helping them build credit, FreeKick can help.
Gift a Secure Financial Future With FreeKick
Provided by the FDIC-insured Austin Capital Bank, FreeKick is a deposit account and a subscription service that offers credit building for teens and young adults aged 13 to 25 and identity monitoring and protection for both parents and children.
FreeKick’s Credit Building for Children
You can create a FreeKick account and start building credit for your child in three simple steps:
- Create an Account—Go to FreeKick.bank and pick an FDIC-insured plan that best fits your budget
- Set It and Forget It—After creating the account, FreeKick starts building 12 months’ worth of credit history for your child that gets reported once they turn 18
- Keep Growing—Once the 12-month period is over, you can renew your subscription and continue to build your child’s credit, or close the account and get 100% of your deposit back without any penalties
FreeKick’s Identity Protection for the Whole Family
Identity theft is a growing problem, especially among young people—in fact, a child’s identity gets stolen every 30 seconds.
Aware of this growing concern, FreeKick came up with a solution to provide identity monitoring and protection for up to two adult parents and six children aged 0 to 25. Take a look at the services you get when you sign up:
| Services for Minors | Services for Adult Children and Parents |
| Social Security number monitoring Credit profile monitoring Up to $1 million identity theft insurance Full-service white-glove concierge credit restoration Dark web monitoring for children’s personal information Sex offender monitoring—based on sponsor parent’s address | Social Security number monitoring FICO® Score factors Credit profile monitoring Dark web monitoring for personal information Up to $1 million identity theft insurance Lost wallet protection Court records monitoring Change of address monitoring Non-credit (Payday) loan monitoring Free FICO® Score monthly Experian credit report monthly Full-service white-glove concierge credit restoration |
FreeKick Pricing
FreeKick pricing is made to suit any budget, and all deposits are FDIC-insured with up to $250,000. Here’s a table overview of the available plans:
| FDIC-Insured Deposit | Annual Fee |
| $3,000 | $0(Free) |
| No deposit | $149 |
Help your child step into adulthood with good credit and protect their personal and financial information all at once—sign up for FreeKick today!
