I had 7k in mutual funds that my parents saved for me; at 23 I was able to use this as a downpayment / closing costs on a condo (when mortgage loans were a little more flexible; plus I had a good income)

Whatever you save it for, I would save it for something long term and substantial like that.

When they were younger, I put it in their college funds. Now I put it in a savings account that they can control (check the balance, determine how the funds are used, etc.) My kids do not get $$ from us monetarily outside Christmas and Easter for tangible goods. So anything they want, they must save up for what they want. This works well because everytime they want something (games, apps, toys, high cost, name-brand clothing items, etc) they have to consider how it will affect their savings. Of course, we are not talking about $7K accounts at age three. I started placing the money is savings accounts (instead of college accounts) at age 7. One kid (13) has about $1K and the other (10) has about $700.

I'm using what little DD has to pay for the damages she's caused before we put the house on the market.

My parents put mine in a savings account for me. It wasnt much, but I was able to buy a crappy old car when I got my license thanks to it!!

Similar to PP, my parents bought savings bonds monthly when I was growing up and I used those for all of my books in college.

Anonymous wrote:

Anonymous wrote:We just put it in a savings account. When the kids got old enough they added debit accounts linked to the savings accounts and could do with it what they wanted. One used it for spending money, the other keeps adding to savings. The amount of cash gifts they got before they started getting stuff like gift cards wasn't that much though - maybe $1,000 total by the time they were 14 and got the debit cards.

She's already got close to $7k in there at the age of 3. I can't see giving unfettered access to that kind of cash to a young teen. My parents turned mine over to me when I got my first job at 17 and told me that it was my responsibility to manage it and add to it so that I could provide my own spending money in college. At the time it had around $2500 in it and I got it up to $8k before I left for college.

If you are expecting it to continue to grow at $7k every three years then I would set up a mutual fund or other UGMA account. Maybe keep a nominal amount in kid savings. We have those accounts for each kid and whatever is left when they graduate from college will be theirs to do what they want, hopefully pay for part of grad school but maybe supplement their earnings in their first job. Each one has about $50,000, some of which we might use for special programs (e.g., DC wants to do a summer program this year that will be about $7k - we will use that account for that program since I am not sure it qualifies for 529 funds). My parents had a fund like that for me which I did use for grad school. I think I got access to it when I was 24.

I'd recommend an Index fund to minimize unwanted tax consequences from capital gains/dividends.