I want to give money to kids. In the Future!

October 1, 2009 12:23 PM

I want to give money to relative's children so that they can use it when they're older. How best to do this?

Some of my relatives are having kids, and I'd like to give the kids money. (I'm in the USA.) The oldest of the kids is 5; the youngest (so far) is -3 mos.

The parents all have 529 plans for the kids, but I'd rather not put the money there as 529's are limited to college/educational expenses. I want the kid to be able to spend the money on a shitbox car when they turn 17 or to be able to hike the AT the summer after high school or to buy expensive tools and a worktruck if they eschew college and go into the trades. And have the money in the kid's name, so they can decide for themselves how to use it.

Savings bonds are traditional (and what I've given in the past) but not necessarily as profitable as other financial instruments, and in the case of the oldest child, he'd mature before any new bonds. Are there other bearer instruments? Would non-bearer instruments be done as a UGMA? Should I just buy it in the child's name? How does this all work?

I assume that setting up some kind of "Fund RMD's extended family" trust fund would be excessive for the amounts of money we're talking (several hundred $$ per year per kid), but maybe not?

There have been other questions about investing for kids, but it looks like it's mostly asked by people who are parents rather than great-aunts. Thanks, hive mind!

When they're old enough, I would, of course, buy mefi memberships for them as an investment in AWESOME.

posted by rmd1023 to work & money (10 comments total)

My father-in-law opened a savings account in his and my son's name. He puts some money in it every so often. We found out about it when he mailed a copy of the first bank statement to us.

I think that's a pretty straightforward way of doing things.
posted by zizzle at 12:46 PM on October 1

Consider that if these kids do end up going to college, some giant percentage of this money will be sucked up by financial aid offices for tuition (the estimated student contribution is x% of assets, parental contribution is x-y%).
posted by vilthuril at 1:07 PM on October 1

maybe what you could do is just set up some savings accounts in your name and then when the kids are older, for a gift or something, give them a card explaining that they have this money to use and sit them down and talk about it.

then you don't have to worry about vilthuril's notion of fin aid sucking up all their "fun whatever" money.
posted by sio42 at 1:09 PM on October 1 [1 favorite]

My grandma did this by saving the money in a regular bank account and mailing a check to me one day when I was in college. How much money are you talking about?
posted by a robot made out of meat at 1:11 PM on October 1

Oh, her stated rationale for this approach (and why I shouldn't tell the other grandkids) was that many kids are not responsible enough to handle money. Some people never get responsible, but not having it on hand to waste when I was 17 probably helped.
posted by a robot made out of meat at 1:13 PM on October 1

I do this for my nephews, I just deposit money in a bank account every week for them, and they can have it when they are 18 or whatever.
posted by Admira at 2:30 PM on October 1

The day my friend was born, her grandpa took some money and put it in an account he opened for her. When she was 13 or so, the family decided to go see how it had grown (interest etc) and found: it had all gone. All of it, on bank fees. So yeah, watch out for that.
posted by titanium_geek at 12:00 AM on October 2

Admira: are they set up as a joint account? in your name? their name? UGMA?

Thanks!
posted by rmd1023 at 3:17 AM on October 2

Thanks for asking this, I've been wondering the same as I'd like the funds I give my nieces to go towards the life adventures of their choosing, whether that's college or travel or whatnot.

My method has been socking away a little bit for them each month in savings accounts at ING. They're neither joint accounts nor in their names.
posted by vespertine at 7:12 AM on October 2

it looks like setting up a UGMA requires parental involvement. but setting up a plain old beneficiary account for the kids was a fair bit easier. so i've done that and will be dumping money into that at least for now. when there's a bit more accumulated in there, i may shift it to some other higher return beneficiary instrument.
posted by rmd1023 at 11:21 AM on November 1