What do you do with kids' birthday money?

[scfr]

I think it depends in part on the kids and the givers. When I give to my niece & nephew I specify that it is for their college fund, and my sister deposits to their Coverdell accounts. Both kids are college material, and my sister has requested gifts to help with college costs, so that's appropriate.

If you want and expect your kids to go to college, and you have a family member or friend willing to help out with that, make sure that's where the money goes.

[Petunia 100]

I started savings accounts for both of my kiddos around age 1, for just this reason, to stash their bday money. When the accounts grew large enough, I opened mutual funds for them. When my daughter was 18, she asked for hers and promptly blew it all. My son is 17 now and has no plans to touch his mutual fund. His savings account though, he has a goal in mind for that money.

[PSF]

If the money was giving for a specific reason such as a collage fund I would put it in an account.

If the money was given to them as a birthday gift with no stipulations, I consider it their money so it's not my place to decide what should be done with it. What I would do though is try to take the opportunity to teach them about money.

first of all I would remind them about the benefit of savings, maybe create a spreadsheet (including yearly bday contributions + interest) that would calculate how much all their bday money would be worth if they saved it till they were 18 and show them that.

If they definitely wanted to buy something with it, I would teach them about how to find the best price or maybe to look for good quality vs poor, maybe also the longevity of one item vs another.

My child's knowledge, independence, and critical thinking ability are very important to me.

[Jimhassel]

Yes, you can open a saving account in your kid's name in your local bank.Let your kid along with you fill out the deposit form and update their balances. Also save a few dollar in college saving plan.

[riverwed070707]

How old and how much money are we talking about? DD gets $1-5 from family for random occasions throughout the year. We usually encourage her to put it in her piggy bank to start an early concept of saving but we also allow her to spend it on small toys, chapstick, etc to get a feel for the exchange of money and how you have to have enough before you can buy something. If we're making a casual trip to the store, she might take $2 and she can choose what she'd like to spend it on. She's 4. If its a larger amount, it goes into a vanguard account we have setup for her college savings, which we don't contribute to regularly but it serves as a holder for gifts, etc and we will eventually encourage her to start contributing to it.

[snafu]

We did our best to match small gifts of money so that $ 5. was doubled to $ 10. and deposited to DKs accounts. We tried to add the sum equal to child tax credit to their accounts as Mutual Fund contributions need to be a basic amount. From about 5 y/o our DKs had age appropriate 'tasks' as part of the family. They also did paid 'chores' to help them understand the link between work - money - responsibility [no grumbling]- and the ability to buy stuff. For example a 4 y/o understands the concept of putting dirty clothes in the hamper as part of household tasks. By five they can drag a laundry basket to the washer. Our guys also sorted darks/lights/white for X cents per basket if they worked with willing hearts.

Once they had some reading skills they could choose their chores by writing their name on the appropriate line on a chore chart on the fridge. We didn't ask them to do things they disliked but those chores paid the most. I think more than half the chores were done as a team project with mom or dad. I know their friends had no household responsibilities and by middle school elder son was hired by those parents to do yard work and vacation care.

[helmrose]

If it is birthday money then let them spend it

[thesimplemoneyblog]

As others mentioned, you have numerous options to consider depending on your goals and what you would ultimately like to use the funds for. A few options would be:

(1) You could let the child spend it,
(2) You could open an UTMA/UGMA for the child,
(3) You could open a 529 plan account.