Kids and cash

By Mir
December 22, 2009

Carmie raised a point yesterday that I thought was timely and worth further discussion. She asked:

sking as a future parent of middle-schoolers… you let your kids hang on to their gift cash? Do they give you a portion? Do they have to save it all? Spend it all?

Obviously, my answer to this isn’t going to be right for everyone, but I’m happy to share what we do. And as with all monetary dealings when it comes to our children, I think the long-term goal should be teaching fiscal responsibility in a way that sticks. Demanding that all gifted money be immediately deposited into a savings account is certainly wise in the conventional sense, but if it leaves kids feeling deprived and not in control of their own money, they’re unlikely to make good choices once they have more freedom.

I’ve discussed my allowance philosophy here before; I believe in mandating some savings and charitable giving for our kids with the money they earn.

Now, cash gifts are (to my mind) a little bit different. I do not make my kids donate a portion of gifts to charity, just as I wouldn’t make them take a couple of markers out of the pack and donate them. Heh. Depending on the amount of money, we usually figure out a division of money to spend and money to save. If it’s a small gift, I’ll let them spend it. If it’s larger, we put some in the bank.

I also try to steer them towards purchasing something the giver would approve of (this isn’t completely necessary, of course, but again, I think it helps them to be more mindful). If it’s money from a peer, I’m more likely to let them spend it on toys. If it’s from a grandparent or older relative we usually go towards clothes or books.

How about you? I’m curious to know how other folks handle it. Hit me!


  1. Well, I have a two year old, and up until now all his cash gifts have gone into a savings account. This year, for birthday and Christmas, we have also asked for money to pay for gym classes instead of toys (OH THE TOYS THAT ARE INVADING MY HOUSE!!!!!!). My grandparents are very generous, and we always get a nice check for Christmas from them. My parents always let me use a little of it (1/4 or so) for a want, then the rest of if went into savings. On birthdays, I would get a portion to buy something I wanted, but some also went into savings. FYI: Saving all that Christmas/birthday money, putting it into CD’s when it reached a certain amount, combined with scholarships, paid for an undergraduate degree from a state university plus part of a very nice wedding!

  2. We’re currently struggling to establish a policy for Steph’s Bat Mitzvah, which is coming up (SILENT SCREAM). She’s already started getting gifts (sent with reply cards from those who can’t make it). Obviously she can keep any gift cards or other tangible gifts. As for cash, right now I’m inclined to let her keep any she gets from her friends and put the rest in the bank. I haven’t yet decided whether it will be her regular bank account that she can dip into or a special one created for The Future, when she (presumably/hopefully) will be more interested in buying college textbooks than Hollister sweatshirts.

  3. We have a 5 year old and every year, he gets a lot of money ($50) from his great grandmother. We let him spend it, but I am the keeper of the funds, and pretty much, I have to approve all purchases. We don’t really make him save any – his great grandmother gave him the money to spend on what he wants, so we let him do that, within reason. I try to persuade him from blowing it on junk, but at the same time, I try to give him some freedom, so that he might learn that if you do blow it, when it’s gone, it’s gone, and you don’t get it back. This year he said he’s going to save it for a DS, but we’ll see how long he sticks to that.

  4. The cash gifts my son gets are put in his piggy bank, and we add to it here and there, and it gets transferred to his bank account. We bought a CD a while back with his savings and it rollsover, and then any new in the account we add into it upon renewal. Gift cards he gets he is allowed to spend, with our approval on what he gets. We also are trying to instill responsibility but it’s hard.

  5. I’m reading these responses with interest. Thusfar, we have put money gifts (which are few and far between, actually) into the kids’ college savings accounts. My son is five and understands money more now, so I need to come up with a plan…

  6. I read this topic with great interest as my husband and I have been discussing it for the future. My son is only 17 months so any money so far has gone into his savings account. However, as he gets a bit older, I think I will utilize some of these suggestions.

    FWIW, my parents, who were wonderful in many other ways, did a horrible job teaching me and my sister about money. If we received money as a gift, we never saw it. My parents would go out and purchase a toy with it for us. I would like to give my son some choice in the matter.

  7. Like Mir, we don’t require our children to save a portion of their gift money (only from allowances) unless they want to. With gifts, I end up being the banker, and believe me, the children remember how much gift money they’ve been given. I hold on to the money in my account and will just pay for the item they want, and the money is deducted from their “balance” and if they owe more, they’ll give me that from their cash. If I happen to have the cash to give them, I’ll let them purchase the item themselves. They usually already have an idea of what they want, e.g. Wii game, clothes, etc. I do try to point out when they are spending it on crap, but it’s their money. I know I’ve bought a lot of crap that I later regret…better to learn early! And I don’t steer them towards something I think the giver would “approve” of–I mean, once the money is gifted, it’s no longer their say. If the giver somehow wanted a “say” then they could just send a gift, gift card, or savings bond.

    It’s not as complicated as I made it sound!

  8. Somewhere along the line we adopted a 50/50 rule. Half goes into savings; the other half may be spent. As they (2 boys) got older, they starting saving the “spending half” so they could buy more expensive items like gaming consoles and video games. They’ve learned to look for sales or buy used from ebay to get the best value. They’ve complained on occassion about saving half, but we reminded them that they will want to drive someday (that day has come) and will need to contribute to car insurance. (Major $$ here in NJ!) Also, let them see interest posted to their accounts – free money! Get them involved – we all went to the bank to withdraw their savings and took it to another bank to buy a CD paying MUCH higher interest. Now in high school, they have student accts with debit cards (which I have access to) so they can learn to manage their money before leaving for college. There’s my two-cents plus interest ;D

  9. I have teenagers. I pay for things that are necessities. Meals, clothes basics, the basic things they need for their sports or music lessons. They pay for the extras. If they want brand name jeans or super expensive cleats, they pay for those themselves. They also pay for their activities with friends–movies, out to eat, etc, or meals at McDonalds.

    It sounds crazy, but it works for us. 🙂


  10. Checks get deposited into her savings account. If she ever gets actual cash-cash, she’ll be allowed to spend it. So far we’ve lucked out though! Haha!

    She hasn’t really started caring about money yet and we have trained her not to be a “gimme!” kind of kid at the store and whatnot, so I haven’t started an allowance yet. Probably next year – she’s only 3 now!

  11. We have teenagers. They each have a checking account where the money gets deposited. Then they can spend it as they like (as long as we approve of the item). It helps them to save or say no to impulse buying when they see their accounts getting low.

    For smaller children, you could use the same principle, just not give as much control over the money.

  12. My boys are 10 and 13 and when they get money for gifts, they are allowed to spend it as they want (within my limits). At the older one’s age, almost all he gets for his birthday from friends is gift cards – he will use them to buy some game he wants, or save up for a new electronic toy. He saved from last Christmas, through his birthday until August to buy a new iPod touch. So now he is basically broke again. He is out Christmas shopping, with his own money, right now.

    For managing the money, the best thing I ever did was to set up online savings accounts (I use ING) for both kids and me. That way I can deposit and withdraw money any time, without having to trek to the bank. This makes the kids much more willing to keep most of their money in the bank, not in the desk drawer.

  13. I like reading these!
    I have 2 sons – 6 and 6 1/2.
    We use the 1/3 rule – 1/3 is to give (church or to a charity like World Vision), 1/3 is to save, and 1/3 is for whatever they want.
    They have handy dandy banks that are split into these 3 sections, so it makes it easy. They have chosen a toy (from amazon, of course!) that they would like and I have taped a picture of it on the bank so they remember what they are working towards.

  14. Our son is 9 and our daughter 5. So far only our son has managed to snag a huge amount of cash, probably because his birthday falls in December. We’ve worked with him to help him to learn that once you spend the money, its gone, so you’d better spend it wisely or save it to get something that you really want.

  15. Thank you for posting this, Mir! I have learned a lot and will be watching this thread.

  16. Ours is 5 and we’re still feeling our way on this. Previously, everything went into savings, but since her 5th birthday, we’ve allowed her to use some of the piggy bank’s cash on things she wants.
    But as the only grandchild on both sides, with lots of doting great-aunts and uncles, and loving friends and neighbors (she’s the youngest amongst them as well), she’s got enough money that I don’t think she grasps yet that there’s only so much of it.
    It’s time to sneak in another depositing trip to the bank!

  17. We’ve got a 12 year old and a 9 year old. My 12 year old can save for months and months for a big item (iPod touch) while even two dollars burns a hole in my daughter’s pocket. We don’t have a set savings plan for either of them but our general rule of thumb is that 25% goes to savings with the exception of birthday money from friends.

    My boy works (mows lawns, rakes, shovels snow) in the neighborhood so he’s got a decent little income.

    I love the idea of setting up a debit card/checking account in high school so they don’t think they’ve got a never ending supply once they hit the freedom of college…great idea!

  18. Most of my family lives out of state so money is the easiest gift to send. My rule is if it comes in a check it goes into savings and if it’s cash they can have it. My family knows my rule and usual sends one check for me to deposit into their account and some cash for them to spend. If they would get all cash or all checks we usually do 25% in savings.

  19. My son is 8. He gets a $1 allowance every day depending on his behavior. He is a special needs kid and needs a little convincing to be on his best behavior. He actually prefers to save his money. I have told him that he can save some, and spend some, but he wants to save it all. When he gets gift money, he also chooses to save that. When the day comes that he actually wants to spend it, I will let him decide weather he wants to spend it all or spend some/save some. I mean, it was given to buy what he wanted so, how can you argue with that. I couldn’t imagine making him give me some of it. He knows that the money was given to him to buy what he wants. He then says that he wants to buy saving. It works for him. Now if there is a toy or game or something that he wants, he really thinks and makes sure it is something he wants. Then we figure out the total price with tax and he takes out that exact amount.

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