What to Do with a Large Sum of Money Given to Kids

Updated on August 05, 2010
V.M. asks from Conneaut, OH
16 answers

i guess i need to edit to say "Investing in what is a large amount to ME" My kids both recieved $300 from my grandmother's estate. They have some $50 savings bonds that my inlaws give them on birthdays plus about $200 from various relatives over the years in a savings account. Hubby just wanted to put the $300 in their savings accounts bring their total in savings to $500 each. I am thinking we should invest it for them either in more savings bonds or a CD or something. He takes care of all the banking. . I'd like to not just blindly leave this all up to him, but to be able to discuss the pros and cons of how to care for this money, but I have no experience with this I never had more than $20 in a piggy bank growning up. What would be the best way to deal with the money??? I"d like the kids to have access to it in 10 years when they need it for college.

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answers from Washington DC on

You could put the $300 into 3 rolling CDs. By that, you put $100 in a 3m CD, $100 in a 6m CD, $100 in a 9-12m CD. Then you just keep rolling them over. Put the interest into the savings account. That way you have a CD coming due every few months and can either roll it into a new one or pull the money out without tying up the money for a long time.

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answers from Raleigh on

Ok, so I know that I am late to answer this, but if you haven't done anything with the money yet, don't put it in a college fund! And if you have, make sure that the fund is in YOUR name. My parents put money away for me for college and it made it almost impossible for me to get federal funding! There wasn't enough money in the account to actually help make a difference, but there was enough that they thought I should be able to "cover the rest"! It was a complete and utter nightmare! My parents ended up having to hire college funding experts (there really are such a thing) and a good CPA to make it all kind of work in my favor (I still have INSANE student loans). Just thought I would throw my 2 cents in!

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answers from Chicago on

I think what you do with it depends on what you're trying to do?

Are you trying to teach your kids about saving? Investing? Putting aside money for college?

I know one of my friends got 1 Disney stock as a child. She had a decorative stock certificate and framed it for her room. It was a neat way to display her "investment" gift she received.

If your kids are old enough to understand/beginning to understand money, maybe you could "learn" with them!

You could take $100 and put it in a cd. $100 to buy a stock (for a company they are interested in). Then put $50 in savings. (Or maybe (up to) $50 for them to buy something special. If not, you could put $100 into savings.) You could help them set all this up, then several times a year "check" their balances and watch their money grow. Then as these things earn interest, the CD comes up, the stock splits, etc. you can decide what to do "next". You can remind them - these accounts all started at $100 at the same time, look at how they all grew differently!

This is a teachable moment! Invest now in your kids financial education! Teach them about money, saving, etc. Don't take this money from them and make these decisions without them. Then you're just going to be "handing them" money they won't understand how to manage later. Otherwise, your kids will be in the same boat you are now...

You can use this opportunity to learn together and really have a great learning experience together.

Go for it!

1 mom found this helpful


answers from Milwaukee on

We opened a college fund for my daughter, we went with the Utah education saving plan (every state has something similar but we found Utah's to have the best rate & rules, we live in WI). We did need $1000 to open it and our daughter can withdraw from it when she is in college and after college, if there is still money left (which I doubt will happen), she can withdraw the rest upon completing college.

Whatever you do put it into something that will gain interest so it will accumulate money, depending on the saving account they usually do not gain interest or they gain it way too slow to really get anything from it. Putting it into an educational savings plan it ONLY can be used for education and most/some are tax free.

1 mom found this helpful


answers from Kansas City on

I certainly am NOT an expert and I am more of a conservative investor but I would say savings account. Someone else mentioned that really isn't a lot of money to "invest," And quite frankly I would worry about investing in this economy. Especially since you said you'd like to have the money available to them in 10 years. Plus, depending on how you would invest it, they kids may get hit with fees/taxes when they try to get the money.

As our kids were growing up the rule was any large sums like that or any checks had to go in their account. Some banks even have "kid accounts" that teaches them about saving. That way they are included in the whole process.
But at their ages now, our son is getting ready to move out and has a little money to help him get started. Our daughter is still in high school and wanted a new phone. She had to go to the bank, draw the money out and pay for it herself to see how much she really was spending.

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answers from Minneapolis on

Open a 529 savings account for them for college. You can invest as little as $25 and it will grow and can only be used for college expenses. A savings account won't grow.

PA has one run by their treasury department:

In MN, our state actually matches our contributions (up to a point), as well. I put $25 a paycheck in and it has grown considerably.

Most experts agree that a 529 plan is the very best option for saving for college.

Good luck!


answers from Allentown on

Hi, V.M.

At Edward Jones Financial advisors, they have college funds that you can create for your children.

Good luck. D.



answers from Denver on

Like many others have said I would suggest the CD route or just leaving it in the savings account. The APR's are similar these days for savings accounts and CD's. Most CD's (depending on bank) require a minimum of $1000-$1500 so you might need to combine the kids money into one CD. You could look online or call around to several different banks and find out what their current CD rates are and for what time periods. You can normally find a highter APR if you do a longer term CD, like 24 or 36 months. Dont take the interest out, just keep rolling the interest over back into the CD.


answers from Austin on

Good for you all!
I suggest, Savings for a college fund.
Keep adding to it every chance you get. When you have $1000. Put it in a CD. Keep rolling it over.Speak with your banker or better yet a credit union.
Many times, if it is a childs account there are no fees or very small fees.

Our daughter is in college full time. she lives on campus. IF she did not have grants and scholarships, the cost would be $58,000 per year. Thank goodness she is an excellent student.

Average Texas in state tuition per year (just tuition) is abut $7200. per year. Save, save, save and encourage your children to do well in school..



answers from Dallas on

Well, I am no banker, but $500 is not a whole lot in terms of investing, CDs or money market accounts. I would go ahead and build it up a little more($1000 - 1500) and then speak with a personal banker about options for your children's savings and CDs, etc.
The issue with some of these services is you cannot continue to make contributions to them or you can only add to them at certain times of maturation so you typically want to start with a larger sum.
However, I bet if you go to your bank's website they will have summaries on their different investment products. You could even check out investment sites like Fidelity, State Farm or Charles Schwabb for tips on investing and saving for your children's future. They may have the perfect product for a $500 investment!



answers from Houston on

I agree with the others who have mentioned the 529 plan. The money will grow and there are tax advantages. You won't earn much in a savings account.



answers from Detroit on

Get a savings account or, take all of the money and open a CD, if there's enough.



answers from Fort Wayne on

Call your bank and ask for a meeting with someone that deals with investing. They should be able to guide you in the right direction.



answers from Indianapolis on

I'm surprised no one has mentioned a 529 yet.

If it's for your kids, I'd put it into something that has a dedicated purposed like a 529 which is for higher eduction (post high school). It can be a trade school, college, culinary school and can be transferred to another child.

The catch is that there's a penalty for using it for another purpose.

When my grandmother died, and I inherited a large sum of money, even though I was 21, it was invested for me into mutual funds. The market hasn't been kind, but it still has the same value today as it did when I received it.

Regardless, the best advice my father gave me was to go on as if the money didn't exist.

In your case, a saving's account may be one of the worst options with low interest rates. You may be able to get a short-term CD with a better yield. Unless you NEED the money, invest it long-term and have something of much greater value for your kids.

My husband and I met with an accountant when we first got married, and he told us that the day we graduated from college, we were already behind the 8 ball in terms of preparing for retirement. Scary!


answers from Jacksonville on

You could check into some money market accounts. I don't know how much is required to open one, but $500 should be plenty. You can put all $600 in one account, and then divide the balance up later when you decide to do something different with the money.

Or, a CD is fine. The kids won't be needing/using that money for awhile. So get the best rate you can find. I don't think they are very good rates right now, so I wouldn't lock into a long term CD. Go short term and reinvest (at hopefully a higher rate next time). You can get them in 6 month, 1 yr or longer terms. Go shorter term and watch for the return rate (interest rate) to rise. Even the 6 month CDs probably have a better rate of return right now than a standard savings account.



answers from Indianapolis on

Start a 529 college fund for each of them. They are untaxed accounts as long as the funds are used for education. Find out if your state has one with tax benefits (Indiana gives a 20% tax refund on all 529 deposits!!) and if not, then I'd do a UPromise account. You can get a UPromise credit card that automatically contributes 1% of all purchases plus many stores, brands, and restaurants give up to 10%! We get $20-30/month just for the spending and expensive we have to live :)

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