Holiday money has a way of disappearing fast.
A child gets $50 from Grandma, another $25 from an aunt, maybe a little more from somebody else, and suddenly they are walking around Target like they have a venture-capital fund.
There is nothing wrong with letting kids enjoy some of their gift money. Money is meant to be used, too.
But holiday cash can also be an opportunity to teach them something they may not learn anywhere else: money can do more than buy something today. It can help build something for later.
That is one reason I started investing for my own kids.
My parents were not in a position to invest for me when I was growing up, and honestly, investing was not something they really knew about. When I started learning about investing myself during COVID, I realized I wanted my children to have a financial head start that I did not have.
They were 9 and 14 when I opened investment accounts for them.
I did not start with thousands of dollars.
Today, I contribute $25 a month for each child.
That is $50 total.
Nothing flashy. Just consistent.
And over time, they have been able to watch those accounts grow.
Why Invest Some of Their Holiday Money?
When kids receive money for Christmas, birthdays, graduations, or other occasions, the natural response is usually:
What are you going to buy?
But there is another question worth teaching them to ask:
What could some of this money become later?
That does not mean every dollar needs to be invested.
If there is something meaningful they genuinely want or need, I am perfectly fine with them using some of their money for it.
What I do not love is spending money simply because it is there.
There is a difference between:
“I have been saving for this and really want it.”
versus:
“I have $100, so I need to find something that costs $100.”
That second one is exactly the money habit I want my kids to avoid.
Investing a portion of holiday money gives you a chance to teach them that money can have different jobs.
Some can be spent.
Some can be saved.
And some can be invested for a future they cannot even picture yet.
What Is a Custodial Investment Account?
A custodial brokerage account is an investment account an adult opens and manages for a minor.
The money and investments belong to the child, while the adult custodian manages the account until the child reaches the age when control legally transfers to them.
These accounts are often established under laws known as UTMA or UGMA.
You can generally invest the money in things such as stocks, mutual funds, or exchange-traded funds, depending on the brokerage and account.
One important thing to understand before opening one:
Money placed into a custodial account belongs to the child.
This is not a savings account you can later decide to take back because Junior suddenly announces he plans to spend his fortune on something ridiculous.
Once the money is gifted to the account, it is theirs.
The age when they take control can vary depending on state law and account structure, so check the rules where you live and the information provided by your brokerage before opening one.
6 Easy Steps to Invest Your Child’s Holiday Money
1. Decide How Much of the Gift Money to Invest
You do not have to invest every dollar your child receives.
You might decide to:
- invest half and let them spend half
- invest a certain dollar amount
- let them spend money toward something meaningful and invest the rest
- make the decision based on the size of the gift
I do not think there needs to be one rigid rule for every family.
For me, the bigger lesson is helping kids understand that receiving money does not automatically mean spending all of it.
If Grandma gives them $100, maybe $25 or $50 goes toward their future.
That is still money they received.
They are simply using it differently.
2. Choose a Brokerage
You will need a brokerage that offers custodial investment accounts.
Look at things such as:
- account fees
- investment choices
- minimum deposit requirements
- ease of use
- educational resources
- whether you already use and trust the company
I opened custodial accounts for my kids through Schwab because that is what worked for us.
You do not have to use the same brokerage I use.
The important thing is choosing a reputable provider and understanding how the account works before putting money into it.
3. Open the Custodial Account
The adult opens the account as the custodian and provides information for both the adult and the child.
The brokerage will walk you through the required information.
Do not rush through this part just because the website makes opening an account look easy.
Read what you are agreeing to.
Pay attention to:
- ownership
- when control transfers to your child
- tax considerations
- contribution rules
- how withdrawals work
Custodial accounts are pretty straightforward once they are established, but you still want to understand what you are opening.
4. Deposit the Holiday Money
Once the account is open, transfer the amount you decided to invest.
That could be $10.
It could be $25.
It could be $100.
There is no magic amount that suddenly makes investing “worth it.”
This is something I want my oldest to understand now that he has started his first part-time job.
He has not even received his first paycheck yet, but I would love for him to begin investing something from each check.
Even if it is only $5 or $10.
At this stage, I care more about the habit than the amount.
If investing becomes something he automatically does when money comes in, increasing the amount later will be much easier.
The same idea applies to holiday money.
Starting small teaches the behavior.
5. Choose an Investment
Opening the account is only the first part.
Money sitting in the brokerage account as cash is not necessarily the same thing as having that money invested.
You still need to choose what to invest in.
I keep my kids’ accounts fairly simple. They own a mix of investments rather than me constantly buying and selling things.
This is also where you need to remember that investing involves risk.
The account will not increase every day.
Some days it will go up.
Some days it will go down.
Some years may be better than others.
That is part of investing.
If you are new to investing yourself, take time to learn before choosing investments for your child. You do not need to become a Wall Street analyst over Christmas break, but you should understand what you are buying.
6. Show Your Child What Is Happening
This may be my favorite part.
I actually show my kids their accounts.
They know they own investments.
We talk about why the value goes up and why sometimes it goes down.
I explain it as best I can without turning dinner into an economics lecture nobody requested.
And they have been surprised by what they have seen.
At one point, I was not contributing additional money to the accounts, but the balances were still growing.
That was a great real-life example for them.
They could actually see the difference between:
Mom putting money into the account and the money already invested increasing in value.
That lesson is much easier to understand when they can see their own numbers.
You Do Not Need a Lot of Money to Start
I think this is where some parents stop before they even begin.
They hear “investing for your children” and picture families putting hundreds or thousands of dollars into accounts every month.
That is not what I am doing.
I currently contribute $25 per child each month.
Could somebody else contribute more?
Absolutely.
Could somebody contribute less?
Absolutely.
The amount matters less in the beginning than getting started and building consistency.
If your budget is already tight, do not create another financial obligation you cannot comfortably maintain.
Start with what fits your life.
The same principle applies to your own finances. If you are trying to figure out what your paycheck can realistically handle before adding another goal, my How to Budget by Paycheck article is a good place to start.
Your child’s future matters.
So does keeping the lights on today.
Both belong in the conversation.
What Could the Money Be Used for Later?
I do not have one specific purpose picked out for my children’s investment accounts.
That is intentional.
Maybe one day the money helps with:
- a down payment on a home
- buying a reliable car with cash
- starting a business
- education
- moving expenses
- building an emergency fund
- keeping the money invested for retirement
I want them to have options.
The goal is not for me to decide their entire adult life while they are still kids.
The goal is to give them something to start with.
Financial freedom looks different for everybody.
Sometimes it begins with simply entering adulthood with a little money already working for you.
Let Them Enjoy Some of Their Money Too
I am not trying to raise children who stare lovingly at an investment account while refusing to ever spend a dollar.
That is not financial freedom either.
If my kids receive money and there is something important they genuinely want, I am fine with them spending some of it.
The lesson I want them to learn is intentionality.
Not:
Never spend money.
But:
Decide what you want your money to do before it disappears.
That is the same lesson I use in my own budget.
If you are working on building savings while still managing bills, debt, and family responsibilities, you may also want to read How to Save Money When Money Is Tight.
Saving and investing become a lot easier when money gets a job before you spend it.
Use the Holiday Money as a Teaching Moment
You do not have to turn Christmas morning into a seminar on compound growth.
Please don’t.
Let the child open the envelope.
Let them be excited.
Then later, have the conversation.
You might say:
You received $100. Is there something important you want to use some of it for? What if we invested part of it and let that money grow for your future?
That gives them a voice while still teaching them that spending is not the only option.
As they get older, involve them more.
Show them the account.
Explain what they own.
Talk about why markets rise and fall.
Let them watch what happens over time.
By the time they start earning their own money, investing will not feel like some mysterious thing wealthy people do.
It will simply be one of the things money can do.
The Real Gift Is the Habit
The $25, $50, or $100 you invest from one holiday gift probably is not going to make your child wealthy by itself.
That is not really the point.
The bigger gift is teaching them early that money can be used to build something.
I did not grow up with investments waiting for me.
When I started learning about investing during COVID, I was learning for myself and realizing at the same time that I could teach my children differently.
So I started.
Not perfectly.
Not with huge amounts.
Just consistently.
Now they can look at their own accounts and see money they did not spend years ago still working for them.
That is the lesson I want to stick.
Now they can look at their own accounts and see money they did not spend years ago still working for them.
That is the lesson I want to stick.
Recently, my daughter told me she only wanted money for Christmas so she could choose what she wanted herself. Then she added that she might put $100 of it into her high-yield savings account so it could earn interest.
That made me smile, because it felt like one of those little signs that the money conversations are sticking. I am not trying to teach my kids that they should never spend their money. I want them to understand that money can have more than one job. Some can be enjoyed now, some can be saved, and some can be invested for later.
To me, that is the real gift: helping them build the habit of thinking about what they want their money to do before they spend it.
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