Imagine that you ask your 13-year-old for their holiday or birthday wish list, and in the top spot is one word: money. What’s the best way to go about giving your children money as a gift?
Here are answers to some of the most common questions about gifting money to children and tips for doing it in a way that can help build healthy money habits.
When is the right time to start giving your children money as a gift?
There’s no universal rule about the best age to give money to kids. It depends on the child’s personality and level of maturity, says Liz Frazier, author of “Beyond Piggy Banks and Lemonade Stands: How to Teach Young Kids About Finance (and They’re Never Too Young).”
A 3-year-old may look at a dollar bill as green craft paper, and a 7-year-old may think the gift of money is boring. But by age 9, some kids may start to understand the concept of saving for things they need and want. As a parent, you’ll know best when your child is ready to start learning some of the fundamentals of money management—even if it’s at a very elementary level.
How much should I give my kids as a gift?
The dollar amount of a monetary gift will vary from family to family—but you could try basing it on how much you’d normally spend on a gift for them. The amount isn’t the most important aspect of the gift, though.
“Exposure is the most important thing at a young age,” says Frazier.
Choosing a cash gift amount that fits your family’s budget and having a plan to help your child understand the gift’s value are key. Whatever the amount, consider helping them designate different portions of the gift toward different goals.
Did you know? If you’re giving a large monetary gift to an adult child, keep in mind that there’s a limit to how much money you can gift in a year without tax implications. In 2023, that limit is $17,000 per child per parent.
How can I help my kids use cash gifts responsibly?
Providing guidance when giving children money to help them use the gift wisely is a great way to help your kids start building a healthy relationship with money.
One idea is to help them split the money three ways: They can save a portion for a future goal, they can spend a portion on something they want now, and they can share a portion by making a charitable donation or doing something nice for someone else. There are financial lessons in all three options.
You can make saving fun for your child by getting them a special piggy bank or taking them to the bank to open a savings account in their name. You can also discuss with your child what they want to save up for—and how they can earn the money to pay for it.
If they choose to spend most of the cash gift, explain how you earned the money. Reinforce that if they work hard while saving and spending wisely themselves, they can earn their own money to use as they see fit.
Donating some of the gift or using some to do something nice for someone else can show a child how their money can have a larger impact. Let your kid decide what charity or organization to support.
“It’s not about the end result for kids—it’s about the process,” Frazier says. “My son loves sharks, so we donate his ‘charity’ jar to a shark fund. He’s not going to save the sharks with a few dollars, but it’s about him learning the process of giving. That is hugely impactful in the long run.”
How can I give money to my kids as a gift?
Cash may be the best option for younger kids, so they can physically see their money as they spend and save. But for teenagers, digital money-sharing apps can work. Then they can get in the habit of checking their online savings account to watch their money grow.
And if you do decide to give money to your kids as a gift, make sure you give them the freedom to use the money.
“Decision making is a really big part of learning how to manage money, and it’s important for them to make mistakes,” Frazier says. “It’s OK for them to buy something awful, it breaks, and then they learn from that. It’s hard for parents to sit on their hands and allow their kids to do it, but it’s a part of learning to manage their finances, without any consequences.”
Download this checklist (PDF) to get more financial literacy ideas for kids.
The bottom line
Gifting money to your children can be a great chance for them to learn and grow. As far as when and how much to give, every child and family will be a bit different. But when you decide the time is right, you can help them make the most of the opportunity by helping them come up with a plan for how to use the gift.
Next steps:
- Consider opening a joint or custodial savings account with your child prior to gifting them money.
- Read about four of the most crucial money lessons to teach your kids.
- Check out our podcast episode on “How to help your kids be good with money.”