What to do with small cash gift for baby

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What to do with small cash gift for baby

Postby sunnyday » Sun Jun 30, 2013 8:05 pm

My wife and I had our daughter three months ago and my parents gave her $100 as a birthday gift. I'm guessing she might get some more cash gifts as she grows but probably nothing much more than a hundred or so dollars a year. What would you recommend doing with the money? Am I able to open up an account in her name? It's probably not enough to bother setting up a 529 account or a brokerage account. Should I put it in a CD with my bank? Right now I'm leaning towards spending it on either her baptism or her 1st birthday party -- on catering, decorating, etc. However, if she has her own financial account it could teach her some good lessons about personal finance down the road.
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Re: What to do with small cash gift for baby

Postby Grt2bOutdoors » Sun Jun 30, 2013 8:20 pm

Your parents gave their grandchild a $100 gift. It's her money but can not legally transact yet - my choice, even though it's not likely to grow fast at all - is to open a minors account at TreasuryDirect and purchase an I bond. You spending your child's money on decorations, a cake or baptism is not likely something your child would remember, nor will she remember that $100 being a gift from her grandparents. If you want to purchase decorations, would you have done so if you did not receive that $100? If the answer is yes, then obviously supplanting your money with theirs is a bit dis-ingenious, isn't it? However, if she had an I bond or a savings account, you could easily point out that the $100 came from her grandparents who thought of her in a special way at her birth.
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Re: What to do with small cash gift for baby

Postby Whit » Sun Jun 30, 2013 8:39 pm

Congrats! Hope you are cherishing every milestone.

Grt2bOutdoors wrote:Your parents gave their grandchild a $100 gift.... However, if she had an I bond or a savings account, you could easily point out that the $100 came from her grandparents who thought of her in a special way at her birth.


I agree with the idea of having something for her to look back at when she gets older and know that her grandparents gave her a gift. I can still remember seeing the passbook savings account record for a savings account that was started in my name as an infant. The first entry was $3 from my great-uncle. (it was a while ago) It gave me something concrete to look at, appreciate, and say thank you for when I got older.

I would not spend the money on catering or decorating a party.
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Re: What to do with small cash gift for baby

Postby sunnyday » Sun Jun 30, 2013 8:45 pm

Cool, thanks for the replies. I like the idea of opening an I-Bond account in her name. That's easy enough and that way it won't depreciate over time. Now, when do I give her access to the money? Ok, my wife and I can figure that one out on our own but just curious how others feel :D
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Re: What to do with small cash gift for baby

Postby Grt2bOutdoors » Sun Jun 30, 2013 8:51 pm

Not until she's old enough to appreciate it - umm? 15-16? Technically, TreasuryDirect won't turn it over to her until she's age 18.
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Re: What to do with small cash gift for baby

Postby MN Finance » Sun Jun 30, 2013 11:18 pm

First, if youre not sure, then ask your parents. Second, if they say "whatever" then buy diapers or things you need for goodness sake. Or, third, if youre sentimental about it and need to set it aside, then open a 529. We did that for each of our kids. Every time they get checks or cash it goes in my pocket then I just make an electronic contribution to their account. Over the years those $20s do start adding up.
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Re: What to do with small cash gift for baby

Postby mnvalue » Mon Jul 01, 2013 5:09 am

I think that savings bonds need to NOT be in the child's name (at least in this scenario) to get the tax deduction on interest when used for education. This seems to confirm that, and might affect your plans: http://www.treasurydirect.gov/indiv/pla ... cation.htm
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Re: What to do with small cash gift for baby

Postby happymob » Mon Jul 01, 2013 8:45 am

mnvalue wrote:I think that savings bonds need to NOT be in the child's name (at least in this scenario) to get the tax deduction on interest when used for education. This seems to confirm that, and might affect your plans: http://www.treasurydirect.gov/indiv/pla ... cation.htm

True, but you can also have the kid pay the interest, and as long as they are under kiddie tax limits, there will also be no tax.

Since you can elect to shift from paying taxes at redemption to paying them annually at any time (though you can't do the reverse), I would watch the interest accrued occasionally and if it approaches kiddie tax limits (it won't on $100, but if this is added to, it eventually might), switch to "paying" it annually. It's not that hard to file a 1040 for the kid each year.
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Re: What to do with small cash gift for baby

Postby rkhusky » Mon Jul 01, 2013 9:16 am

I just keep track of the kids' gifts in a spreadsheet. When they want to buy something, I deduct from their balance. I even give 5.25% interest. Guess I am Bank of Dad.
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Re: What to do with small cash gift for baby

Postby Kosmo » Mon Jul 01, 2013 9:44 am

When my son was born last year I opened up a 529 and a savings account in his name. I initially funded them with our money, but all subsequent gifts he received has gone into those accounts. The savings account is with Capital One 360 (used to be ING). It's extremely easy to create a kid's sub-account through their website. The 529 is obviously for college, but the savings account will be for anything he wants to use it for once he's old enough to understand money. Hopefully that's before he's 18. I'll be doing the same thing for kid #2 coming in September.

sunnyday wrote:Right now I'm leaning towards spending it on either her baptism or her 1st birthday party -- on catering, decorating, etc.
Definitely do not do this. It's not your money.
However, if she has her own financial account it could teach her some good lessons about personal finance down the road.
Taking money that isn't yours is not the first lesson you want her to learn.
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Re: What to do with small cash gift for baby

Postby bungalow10 » Mon Jul 01, 2013 10:53 am

sunnyday wrote:My wife and I had our daughter three months ago and my parents gave her $100 as a birthday gift. I'm guessing she might get some more cash gifts as she grows but probably nothing much more than a hundred or so dollars a year. What would you recommend doing with the money? Am I able to open up an account in her name? It's probably not enough to bother setting up a 529 account or a brokerage account. Should I put it in a CD with my bank? Right now I'm leaning towards spending it on either her baptism or her 1st birthday party -- on catering, decorating, etc. However, if she has her own financial account it could teach her some good lessons about personal finance down the road.


When my older kids get money now (they are 5 and 3 - the 6 month old doesn't get much money) we spend it on something like a Children's Museum membership, pool pass, day at a ballpark, etc. We like to have experiences with it. I already save for their college. When they get small amounts randomly ($1 or change here and there) they save it in their bank. I make sure when we have the experience purchased with gift money that I tell them that this was from grandma or their uncle, etc.

My kids recently got $23 by crushing and selling aluminum cans and they took it to a ball game and got to buy whatever they wanted... which was cotton candy and ice cream ($23 doesn't go far). They got to choose and I helped them with how much different items cost. It was pretty fun - they got to eat junk food that I would have not bought for them (or at least not that much of it), and they learned how expensive things are, especially at ball games, and that money is finite. WIN-WIN!
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Re: What to do with small cash gift for baby

Postby WHL » Mon Jul 01, 2013 9:02 pm

savings bonds for sure. My mom and dad did this with my brother and I, when I was around 25? I cashed them in (wish I still had them now!) and fully funded a Roth IRA with the money.

request that all gifts be made in cash or savings bonds. little kids don't need piles of junky chinese toys that they won't remember. they'll enjoy having the money for a car at age 16 or something similar a lot more.
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Re: What to do with small cash gift for baby

Postby joe8d » Mon Jul 01, 2013 10:18 pm

sunnyday wrote:My wife and I had our daughter three months ago and my parents gave her $100 as a birthday gift. I'm guessing she might get some more cash gifts as she grows but probably nothing much more than a hundred or so dollars a year. What would you recommend doing with the money? Am I able to open up an account in her name? It's probably not enough to bother setting up a 529 account or a brokerage account. Should I put it in a CD with my bank? Right now I'm leaning towards spending it on either her baptism or her 1st birthday party -- on catering, decorating, etc. However, if she has her own financial account it could teach her some good lessons about personal finance down the road.


Babies need a lot of things.I think the intention of the cash gift was that you know what she needs, so buy it with that money.
All the Best, | Joe
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Re: What to do with small cash gift for baby

Postby Kriegsspiel » Mon Jul 01, 2013 10:22 pm

I was planning on opening a Vanguard account for my new niece and "giving" her a few shares of VT. I haven't checked with Vanguard, if you all already know if that's not possible (minimum contribution or whatever), then I won't bother, and I'll set up a TreasuryDirect account for her instead.
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Re: What to do with small cash gift for baby

Postby spotty_dog » Mon Jul 01, 2013 10:30 pm

[quote="sunnyday"It's probably not enough to bother setting up a 529 account or a brokerage account.[/quote]

Every little bit counts. My ILs send all their grandkids about $400 each year on their birthday, earmarked "for college". We deposit immediately into their 529s; we also make our own (somewhat larger) contributions semiannually.
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