7 Smart Ways to Give Your Kids or Grandkids Money This Holiday Season

Giving grandchildren money is one holiday tradition that never goes out of style. But how you give that money can be just as important as how much you give.

Cash in cards is easy to understand, but it also may not get saved.

Setting up an investment account? That’s practical, but grandkids may not be excited about it.

A gift card can give kids a spending option, while some savings options can give them a head start on financial security once they are adults.

Here are some good ways you can gift money during the holidays and how to determine the best decision for your family.

1. Give cash

Ah, cash. Every child can appreciate a little extra green. It could mean adding more coins and bills to the piggy bank or a chance to splurge on a favorite treat.

Cash is a favorite because it’s so easy to use. You slip some bills into a holiday card, and you’re done.

But cash can also be spent immediately on something that won’t last long. And it’s easy to lose or accidentally wash.

Handing your grandchildren cash is appropriate if they’re responsible (you trust they won’t lose it) and you want them to buy something nice for themselves.

Plus, cash keeps the gift simple.

If cash isn’t an ideal choice, there are bank options. Set them up with a quick-charging debit card that they automatically become responsible for. Plus, the money gets to them immediately. Remember to be specific about how much you’ve given. This will help parents and the grandchild thank you and keep track of the available balance.

2. Visa Gift Card

Gift cards can be another option if you’re unsure how to give money. A universal gift card like a Visa can’t help with a specific hobby but can give your grandchild enough financial freedom to get something worthwhile.

These card amounts can sometimes be the “big ticket item” of a holiday gift. So when you take the total amount of your holiday budget, you can add the card to it without going over your limit.

But they don’t have to be the only thing you give your grandchild. They could be part of your grandkid’s holiday stocking stuffers.

Some Visa gift cards can only be used online or on prepaid products. That means you may have to help them set it up before they can spend it.

Consider your grandchild’s spending habits when you give a Visa gift card. That’ll help you determine where to get the card.

3. Savings bonds

A savings bond is another gift option that’ll keep on giving.

You can buy new bonds for a grandchild or gift them some of your old ones. This kind of gift can help them with a rainy-day fund.

If you give them an electronic bond, they won’t receive it unless they have their account on the Treasury Direct website. Their parents or guardians can create an account for them.

Assuming you give them a Series I bond, they can redeem it at any time after a year has passed.

You can give a grandchild up to $10,000 worth of bonds yearly. And you don’t have to be on the account to give them a gift electronically. You only need their Social Security number to ensure it’s properly given to them.

4. Stocks

Buying stocks for your grandchild can be another head start on their adult financial security.

But you can’t give stocks to a minor directly. If your grandchild is young, you must gift them stock through a custodial investment account.

This means you transfer ownership to a Uniform Transfer to Minors Act account. The minor will not have full legal possession of the accounts until they reach 18.

Unlike a trust, accounts formed by the UTMA can only be given to one beneficiary and can be accessed at any time by them once they turn 18.

And, as the sole custodian, you control the account but won’t legally retain funds once it’s theirs. You can contribute up to $17,000 for an annual gift tax exclusion.

5. Certificates of deposit

Cash AND self-control? That’s what you get in a certificate of deposit (and it’s not a parental scam—it’s more like one long-winded IOU).

The gift is safe and has a guaranteed interest rate.

CDs are meant to help your grandchildren learn financial self-control. This makes them a great gift for high school graduations or grandchildren saving for a major expense like a future car, education or home.

Should they ask for it, you can tell them its details (e.g., bank, amount, expiration date). They don’t automatically get access to the funds.

If you terminate a CD early, most will charge an interest penalty–it doesn’t allow kids to remove or withdraw funds like a savings account does.

And its value is secured until a set maturity date. Once it “expires,” the child’s new interest rate is considered during its renewal.

6. Savings accounts

A savings account can also help your grandchild with their financial future.

These can be a little easier to open than UTMA accounts. Most kids can withdraw money from an account whenever it’s needed.

They can save and invest their spare change with a company like Acorns. Every purchase your grandchild makes is an opportunity to invest their own money without much effort! So coffee for $3.25 becomes a $0.75 investment in your grandchildren’s future.

That freedom may seem concerning at first, but the child does have total access to their secured money. Although the Federal Reserve has removed limits on the number of withdrawals that can be made from a savings account, some banks still limit monthly withdrawals.

Holding extra money in this account for your grandchild can be a great resource in an emergency. Teach them that the account is ideal for things like paying for their share of the cost for special occasions (like prom), future car repairs, or car insurance payments.

7. College saving plans

Helping fund your grandchild’s college degree is a hugely impactful financial support option.

You can fund a 529 prepaid or savings plan, the latter of which doesn’t limit your grandchild to in-state colleges. Prepaid plans require you to pick a primary caretaker for the funds that are saved for the benefit of the child.

You can buy a 529 plan directly from a state (direct-sold) or through a financial advisor (advisor-sold). When using an advisor, they can assist in choosing the best 529 plan for your needs, selecting investments within the plan, and managing the account.

Advisor-sold plans may have higher fees due to the advisor’s commission, while direct-sold plans typically have lower fees.

Their savings grow tax-free and can be drawn from at any time for educational expenses. Given the high cost of college education and the ability to use 529 plan funds for private high schools, these gifts can be enormously helpful.

Final Thoughts

Choosing how to gift money to your grandchildren depends on their age, financial responsibility, and your long-term goals for them. Whether it’s immediate spending power or a future financial head start, each option comes with its unique benefits.

Make thoughtful choices that align with your financial philosophy and help your grandchildren grow into financially savvy adults. For more in-depth information, visit TreasuryDirect.gov, the Consumer Financial Protection Bureau (CFPB), and the SEC’s Investor.gov to explore educational resources and financial planning tools.