What to do with Your Kids Birthday Money

Think back to when you hit your birthday milestones.  They often came with some cash gift from your grandparents, aunts, uncles and family friends. A ten dollar bill felt like a million bucks, and a twenty almost blew your mind.  But ultimately, what you did with that money was up to your parents.

Some of our parents allowed us to immediately spend the cash by picking out a cool toy or clothes or some such treat.  Some of our parents told us to put it in the piggy bank on our dresser and save up for something. And some of our parents made us put it in a bank account, to be forgotten about so that we wouldn’t spend our cash presents frivolously.  

For those of you who are parents, you now realize that you are the one who decides what the little people do with their cash gifts.  If you’re an aunt or an uncle, or even a mentor to a young person, you may also find yourself wanting to help them build healthy financial habits.  And so you find yourself asking, what should my kid do with their birthday money?

There are many options when it comes to this.  But first, you should ask yourself what is the goal.  What are you trying to accomplish by having a plan for your child’s cash gifts?  Do you want to use this cash to go toward their college fund? Do you want to open a checking account to teach them how to manage money? Once you’ve established your goal, then you can begin to properly plan.  

A 529 Plan

You may already have a plan in place for large future expenses like college, and 529 plans are designed to help you prepare for your child’s tuition.  They are state-sponsored educational savings plans.

A Custodial IRA

An IRA for minors, known as a custodial IRA, can be a great investment for your child.  It’s important to learn more about what types of individual retirement accounts can be set up for your child.  This is a great option if your “mini-me” earns income (modeling, starting a business, etc.)!

Checking Account

You may find that opening a checking account for your baby guy or gal is the best course of action for your family.  While there isn’t necessarily a return on opening a checking account, it can be a great tool to help your child understand how to manage a bank account.  

At-Home Piggy Bank

A piggy bank in your child’s room can have a similar effect to a checking account,  by teaching your child to store away money and pull it out for specific items. Depending on how old your child is, you may find that she/he wants a toy a lot less when their own money is on the line!


Depending on how much your child accumulates on those special occasions, you may want to consider investing their money in stocks, or bonds.

Just Spend It!

There’s also the option of using the birthday money for necessities or fun rewards for your little one! You could use the gifts to buy items your child needs for daycare or at home.  You can also use the money to reward them with that new toy they saw their favorite YouTuber playing with!

Whatever you decide to do, having a goal and then a plan is key.  Special occasion cash can be the building blocks of a solid foundation that can lead to healthy money habits as your child grows up.  Talking with your accountant or a financial planner can also help you make wise decisions for your child’s future. Generational wealth has to start somewhere, why not with you?

Written by Desnoyers CPA

Desnoyers CPA

Known for her friendly, outgoing nature and her rare talent for financial foresight, Lydia Desnoyers has been serving individuals and small businesses in Florida since 2010. After earning her Master’s Degree in Accounting from Nova Southeastern University and her Bachelor’s Degree in Accounting from Florida State University, she became a Certified Public Accountant and a Certified Fraud Examiner.

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