What to Do when Your Child or Baby Gets Money as a Gift

As many of you know, we have a five month old. From time to time, she has received money as a gift. She got quite a bit when she was born and was baptized. As a parent, you have a few choices of what to do with the money.

We considered buying clothes or toys, but she doesn't really need any of that. She has enough toys and clothes already, way more than she even needs.

We knew as parents we could spend the money, after all, we do purchase diapers and other baby supplies on a regular bases. It would simply be reimbursing us for the many baby related costs.

We knew there was the option of putting the money away for my daughter and saving it.

We decided to save all of the money for her by opening a 529 account. We researched the 529 plans (Consumer Reports had a great rating article.) We put all of the money down to the very last dollar she received in the account.

We are really happy with our decision and want to keep socking away the money she gets as gifts. When you think about it, if she gets a $20.00 dollar gift - instead of spending it on a toy, or us parents spending it, we are investing it for her. Hopefully, when she is college bound, or an adult, that money will be worth more with the interest it has earned.

You may remember from our previous post, we are using a credit card to earn rewards for her 529 account. This helps us to save for her. Right now we can't put money away for her college since right now we need to get rid of our student loans and fund our retirement.

We hope as our daughter gets older, we can teach her about money. We hope to reach some type of compromise as she gets gifts - maybe spend half, save half.

I can't wait till she is old enough to buy her one of these money savvy piggy banks. Have you seen these? They have different compartments that teach kids to save, spend, invest and donate. They are a very cool take on the concept of a piggy bank.

I just wanted to share with you our situation and offer a suggestion of what do you when your children get money. I'm sure this situation won't always be as easy as she grows up and wants to spend her money. If nothing else, we can bank what she gets while she is very young - it's better than nothing!