Baptism can be an important milestone for new parents and their children. It’s an opportunity to introduce a new baby boy or baby girl to the people close to them. And for families of faith, it’s an event of great religious importance.
When you receive a christening or baptism invitation, whether as a grandparent, godmother, godfather, or other loved one, it’s often customary to bring a gift. Some may choose to bring physical gifts, but most people opt for financial gifts like money or financial assets.
In this article, we’ll discuss why money makes a good baptism gift, how much to give, and the best ways to give a financial gift to help prepare for a baby’s future.
Why Give Money as a Baptism Gift?
A baby’s baptism often represents the first opportunity for new parents to introduce their newborn to loved ones. It’s an important day for parents, grandparents, godparents, and more.
When you’re invited to a baptism or christening, it’s customary to bring a gift. For someone of Christian faith, a gift with spiritual significance may be the norm — for example, a rosary, bible, or bible verse in a picture frame.
But many people also opt for monetary gifts, either instead of or in addition to a religious gift.
There are many reasons a monetary baptism or christening gift makes sense. Here are a few of them:
- Since many children are baptized as babies, they may be too young to really use or appreciate another type of gift.
- Thanks to a baby shower, the parents often already have everything they need for the baby’s nursery.
- A monetary gift invested wisely can have the greatest impact on the child’s future.
The impact of a monetary gift
There’s no better time to start putting away money for the children you love than when they’re very young.
Not only is money the perfect baptism gift idea to show the parents and child that you care, but it can also grow considerably.
Suppose you gifted your godson or goddaughter $250 as a baby baptism gift. If you invest that money into the stock market, it will typically grow over time because of compound interest.
Based on the US Securities and Exchange Commission estimate of 10% annual stock market returns, your gift could grow to more than $1,300 by the time the child turns 18. And that’s only if you never contribute another dime.
If you continue to give monetary gifts over the course of the child’s lifetime, the impact would be even more dramatic.
Your gift has the potential to have an incredible impact on that child’s future. And when they reach adulthood, your loved one will have many options available to them.
College is becoming more expensive than ever. The child could use their baptism gifts — and the earnings they resulted in — to help fund their college education.
What if the child decides college isn’t the right course for them?
Assuming your financial gift is invested in the right type of account (more on this in a minute), the money can help pay for any other financial goals the child has.
Whether they dream of traveling the world or starting their own business, financial gifts from family and loved ones can help them to achieve their dreams.
And sure, it might be hard to imagine a gift you give when someone is a baby having that kind of lasting impact. But if it’s invested properly, it’s entirely realistic.
The Best Way to Give a Financial Baptism Gift
Once you decide that a monetary baptism gift is the perfect gift for your loved one, you must decide the best way to give it. Below you’ll learn why an investment gift is the best route and how to give an investment to your loved one.
Investment accounts for children
As we discussed, compound interest means that a monetary gift that’s invested will have a considerably greater impact for the young person in your life. And while brokerage accounts generally aren’t available to anyone under the age of 18, there are plenty of other ways to invest for the children in your life.
Some of the most common investment accounts for children where you might put a baptism gift include:
- Custodial accounts
- 529 college savings plans
- Custodial retirement accounts
- High-yield bank deposit accounts
What is a UGMA account
A Uniform Gifts to Minors Act (UGMA) account is an investment account that an adult (known as the custodian) opens for a minor. The custodian is most often a parent of the child, but other adults in the child’s life can also serve as the account custodian.
Parents and other loved ones can contribute to a UGMA account throughout the child’s life. While the custodian manages the account, assets in the account legally belong to the child as soon as they are contributed.
Then, once the child turns either 18 or 21 (depending on the state), they take ownership of the account and can use the assets within the account for whatever they like.
The child can leave the assets in the account and continue to let them grow. They could also transfer them to a different account, or sell the assets and withdraw the cash.
UGMA accounts can hold a variety of financial assets, including:
- Index funds
- Mutual funds
- Insurance policies
Benefits of an UGMA account
UGMA accounts provide many advantages that you’re unlikely to find together in any other type of account.
First, UGMA accounts allow you to invest your contributions in stocks and bonds. And as we mentioned previously, this can result in impressive financial returns.
At the most basic level, this growth helps to protect the child’s money from inflation. The Federal Reserve aims for 2% inflation per year. As a result, if your money isn’t seeing a return of at least that much, you’re losing money to inflation.
When you consider putting money into bank accounts such as savings accounts, money market accounts, or certificates of deposit (CD), this is the risk you face.
These accounts certainly have a time and a place — they’re well-suited for short-term goals or money your child may want in their early years. But they aren’t as ideal as a UGMA account for growing money.
UGMA accounts also provide tax benefits. Some parents may consider buying stocks for their child in their own brokerage account. But in that case, the earnings are taxed at the parent’s higher tax rate.
But with a custodial account, the first $2,200 is tax-free. Earnings above that are taxed at the child’s tax rate, which is lower than the rate the parents are likely subject to.
Finally, UGMA accounts provide the benefit of flexibility that you can’t find with other custodial investment accounts.
529 college savings plans and custodial IRAs are other types of accounts that parents and other loved ones can use to invest for the young people in their life. The problem with these accounts is that the child must use the money for very specific purposes.
For a 529 plan, the child can only use the money for educational expenses or risk paying large taxes and penalties for withdrawing the funds. If your child decides not to go to college, they don’t receive the full benefit of the account.
Similarly, a custodial IRA must be used for a very specific purpose. The money in that account is intended for retirement. Account owners can’t generally withdraw the funds until they reach age 59 ½.
UGMA accounts with EarlyBird
EarlyBird offers innovative UGMA accounts to help families save and invest for the children in their lives. The custodian (usually the parent) sets up the UGMA account. They can then invite friends and family to contribute.
Once the custodian creates the account, they can decide how to invest the money within it.
EarlyBird offers five different ETF portfolios ranging from conservative to aggressive. As a result, families can invest in a way that best aligns with their investment goals and risk tolerance.
In addition to the main portfolios, EarlyBird offers values-based funds, in which custodians can invest up to 5% of the child’s UGMA account.
This option provides a unique opportunity for families to invest in funds that promote causes of importance to them, such as diversity and environmental protection.
Contributions to this type of account can serve as unique baptism gifts, allowing loved ones to make a financial contribution to the child’s future while also showing the family they care.
How Much Money Do You Give as a Baptism Gift?
There’s no one right answer for how much money is appropriate to give as a baptism or christening gift. It depends on several factors.
First, consider your relationship with the gift recipient.
It’s likely that most loved ones will bring a gift to a baby’s baptism. But someone closer to the child, such as a grandparent or godparent, is likely to give a more substantial gift than a casual family friend might.
You should also consider your own financial situation.
The child’s parents will appreciate your gift no matter the amount — it truly is the thought that counts. Loved ones shouldn’t feel pressured to stretch their budget for a baptism gift.
Another consideration is whether you plan to give a monetary gift in addition to someone else.
If you plan to pair a gift of money with another spiritual keepsake, you might give less than you would if you were to just give cash.
Finally, keep in mind that substantial gifts may require you to file a gift tax return.
It’s highly unlikely that anyone would reach that limit for a baptism gift — the annual exclusion before one must file a gift tax return is $15,000.
But it’s worth noting that this exclusion covers any gift you give to a single person throughout the year.
If you’re a close relative of the baby boy or baby girl and gift several large gifts throughout the year for the birth, baptism, holiday, and other special occasions, you may end up near that IRS annual exclusion.
How to Contribute to a UGMA Account
If you decide to contribute to a child’s UGMA account as a baptism gift, there are a few ways you can go about it.
Give the money directly to the parents
First, you could give the money to the parents in the form of cash or a check and request that they contribute it to the account. Depending on the brokerage firm the family establishes the account with, this might be the simplest way to do it.
Open an UGMA account
Another option is to open an UGMA account for the child yourself. In most cases, it’s the parent that opens a custodial account for their children. But that’s not necessarily a requirement.
While it might seem strange to open an UGMA account for someone else’s child, there could be situations where it makes sense.
Suppose the baptism gift is for your grandchild or godchild, and you know you’ll be making regular contributions throughout the child’s life. Having easy access to the account and control of the investment decisions might be preferable to you.
Contribute directly through a collaborative UGMA account
Even if you’re not the one to open the UGMA account for the child being baptized, you can still contribute to a collaborative account, both for your baptism gift and other gift-giving occasions in the future.
One of the benefits of opening an UGMA account through EarlyBird is that it’s easy for friends and family to contribute once the account is set up. Using EarlyBird’s app, anyone can contribute to the account in just a few simple steps.
Currently, EarlyBird is the only platform that makes community contributions as easy as Venmoing someone money.
One of the features that makes EarlyBird especially attractive, especially for a meaningful occasion like a baptism or christening, is that you can leave a video message with your gift.
You can easily turn your monetary contribution into a personalized baptism gift by leaving a loving message for the little girl or boy.
Then, when the child reaches adulthood and takes ownership of the account, they can look back on years of personalized messages from loved ones in their memories’ feed.
Those videos can serve as treasured keepsakes for years to come — long after they’ve outgrown other sentimental gifts.
Are you attending a baby’s baptism or christening soon?
You want to make sure you arrive on the baptism day prepared with the perfect gift idea. Giving a financial gift such as a contribution to a UGMA account shows your love for the child while making a meaningful contribution to their future.
And through EarlyBird, your contribution can double as a keepsake when you leave a personalized video for the child. Not only does your gift have a lasting financial impact, but it leaves a legacy of loving memories for the child in your life.
Download EarlyBird on the app store today to start investing in the kids you love.