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9 Meaningful Money Gifts Every Grandchild Would Love To Receive

Choosing the right gifting method depends on your goals.

By Jenni Sisson

Edited by Chris Kissell

Updated Dec. 17, 2024

Investing in your grandchildren's financial future is a wonderful way to pass on wealth, and grandparents who want to give money to their grandchildren have a variety of ways they can do so.

So, what is the best gift to boost your grandchild's financial fitness? It depends on your goals for the money. Here are some options to consider.

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Custodial IRA

Once your grandchild begins to earn taxable income — such as through a summer job — you can open a custodial IRA for them.

Both traditional and Roth versions of the custodial IRA are available, and the contribution limits are the same as they are for adults: the amount of earned income or $7,000, whichever is less.

This can be a great way to give your grandchild the ultimate head start on saving for retirement. With any luck, starting young might help them to retire early decades down the line.

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529 plan

A 529 plan is designed to help kids with future educational expenses. The account can be held in a parent’s name or a child’s name, and the money receives favorable treatment. In short, the money that you withdraw from this account is not taxed as long as you use the cash for qualified educational expenses.

Contributing grandparents do not get a federal tax break for gifting funds to a 529 plan, but they may receive a state deduction for doing so. The IRS does not place limits on how much you can contribute to a 529 plan, although some states might.

Savings bonds

Savings bonds offer a safe place for your grandchildren to build up some money. EE bonds earn a fixed interest rate, while I bonds earn a fixed rate that changes every six months, plus an additional rate that is tied to the rate of inflation.

These bonds earn interest for up to 30 years but can be cashed in as soon as one year has passed. However, if you or your grandchild cash in the bond before five years, you will forfeit the last three months of interest.

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Let’s say you want to invest $250, as an example.

With that amount, you could build a relatively diverse portfolio with an investment of $50 in a big tech stock, $50 in a retail stock, $50 in an energy stock, $50 in a manufacturing stock, and $50 in a bank.¹ This content is for informational purposes only, you should not construe any such information as legal, tax, investment, financial, or other advice. To get stock reward, new customers need to sign up, get approved, and link their bank account. Stock rewards shares cannot be sold until 3 trading days after the reward is granted and the cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at <a href="https://robinhood.com/us/en/support/articles/open-account-pick-your-stock/">rbnhd.co/freestock</a>. Fractional shares are illiquid outside of Robinhood and are not transferable. Not all securities available through Robinhood are eligible for fractional share orders. For a complete explanation of conditions, restrictions and limitations associated with fractional shares, see the Fractional Shares section of our Customer Agreement. Robinhood Gold is offered through Robinhood Financial LLC and is a membership offering premium services available for a fee.

Even better news? Add a Robinhood Gold membership, and you’ll get access to 4.25% (as of 11/15/24) APY² Annual Percentage Yield. Rate valid as of April 12, 2024. To earn interest, a cash balance is needed. If you have a margin balance, there is no cash balance to earn interest. Interest rates for cash sweep and margin investing can change at any time. Fees may reduce interest earnings. on your uninvested cash³ Interest is earned on uninvested cash swept from your brokerage account to partner banks. Partner banks pay interest on your swept cash, minus any fees paid to Robinhood. As of Nov 15, 2023, the Annual Percentage Yield (APY) that you will receive is 1.5%, or 5% for Gold customers. The APY might change at any time at the partner banks' or Robinhood's discretion. Additionally, any fees Robinhood receives may vary and are subject to change. Neither Robinhood Financial LLC nor any of its affiliates are banks. All investments involve risk and loss of principal is possible. Robinhood Financial LLC (member SIPC), is a registered broker dealer. and the ability to buy and sell stocks 24 hours a day, 5 days a week.

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UGMA/UTMA

Two types of accounts — the Uniform Gift to Minors Act (UGMA) and Uniform Transfer to Minors Act (UTMA) — are taxable investment vehicles that allow grandchildren to invest in everything from stocks to real estate.

The account is held in the minor’s name, but they don’t gain full control over the funds until they reach the age of majority as specified by their state. The rules for each account differ slightly, so you might want to consult with a financial advisor or other professional who can guide you to the right choice for your goals.

Consult with the child and their parents before contributing funds to one of these accounts, as an account’s asset value may affect the child’s eligibility for financial aid during their college years.

Cash

There’s nothing wrong with slipping a few bills into your grandkid’s birthday card. It’s a great way to give your grandchild the opportunity to get a little instant joy by spending money today instead of waiting until the future.

There isn’t a tax advantage to you for gifting this way, but it’s simple and appreciated by grandchildren of all ages.

Debit card

To make a cash gift go further, you could coordinate with the child’s parents to put money on a debit card in the child’s name.

Using a debit card will help your grandchild become familiar with digital payments and to learn to manage money responsibly. Some banks and financial apps issue debit cards to teens as young as 13. Others might issue debit cards to children who are even younger.

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Gift cards

Instead of cash, you can also purchase gift cards or a gift certificate to your grandchildren’s favorite stores. There are even gift cards that are good at multiple stores, as well as Visa or Mastercard gift cards that are accepted almost anywhere.

Some gift cards have activation fees or expiration dates, so check for those before you purchase.

Trust fund

Setting up a trust for your grandchildren will allow you to pass on assets in the manner that you think is best.

You can determine when and how the grandchild will receive the cash. For example, if you want to leave your grandchild $20,000, you can stipulate in your trust that $5,000 will be made available at age 18, with the rest of the money being issued at intervals you choose.

It is essential that you consult with an attorney if you plan to set up a trust.

Personal finance books or games

Teaching your grandchildren how to handle the money they earn throughout their lives may be the best way to help them build long-term wealth.

There are personal finance books and wealth-building games available for children of all ages. It’s never too early to help your grandkids develop sound money habits that will help them build wealth.

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Bottom line

Gifting money to your grandchildren can be as simple as putting $20 in a birthday card or as structured as a trust. Before making a gift, consider the age and needs of the child as well as any tax advantages that may come with your method of gifting.

The right financial gifts can start your grandchildren on a pathway that helps them get ahead financially — and stay there for the rest of their lives.

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