Monetary Gifts

The Complete Guide to Gifting

Find out the true impacting gifting can have. Plus, learn about picking the ideal gift and how to gift money, especially to children.


EarlyBird Team

Last updated:

February 13, 2023

EarlyBird helps parents, family, and friends collectively invest in a child’s financial future. Learn more.

What You'll Learn

The practice of gifting dates back to the beginning of humankind and is deeply ingrained in our lives today. It’s a way of following tradition and celebrating your loved ones when they reach major life milestones.

But even more importantly, gifting is a way of showing loved ones that you care. After all, there’s no better feeling than watching someone important to you enjoy a gift that you gave them.

In this article, we’re going to talk about the impact of gifting and how to gift money to your loved ones, as well as a few strategic yet meaningful ways to give monetary gifts to the children in your life.


The Impact of Gifting

The practice of gifting dates back about as long as humans have been humans. Even the earliest civilizations have left behind evidence of gifting. And gifting plays a larger role in our lives than many of us realize. 

There are countless occasions where we give gifts to loved ones. From common events such as birthdays, anniversaries, and Christmas to the less-common ones like graduations, weddings, and christenings, the practice is present regularly throughout the year.

Gifting is most often a way to celebrate a loved one and show them you care. While it’s often done simply as a matter of tradition, gifting is an opportunity to bring you closer to the ones you love.

The psychology of gifting

The benefits of gifting expand far beyond doing something nice for someone you love. It turns out that gifting also has some serious psychological benefits for the giver.

Just the search for the perfect gift can provide an emotional lift for the gift-giver, according to a professor at South University in Georgia. 

The same research found that we get a psychological boost from physically giving a gift to the recipient. 

The satisfaction we get from watching a loved one receive a gift we picked out not only increases our own happiness; it also deepens our relationship with them.

Research also shows that the right gift can have even greater psychological impacts. Studies have shown that when a gift really reflects the personality of the gift-giver, the giver and recipient feel closer to one another.

Similarly, gifting experiences may have more psychological benefits than gifting material things. 

When loved ones exchange experiential gifts, their relationship is strengthened more than when they exchange material gifts.

illustration of three people

The benefit of monetary gifts

Money often seems like an impersonal gift. We hand an envelope with a bit of cash to a loved one and worry that it shows we didn’t put any thought into the gift. But when monetary gifting is done right, that couldn’t be further from the truth.

In fact, a monetary gift can be the most thoughtful gift of all. Rather than seeking out a material gift for the sake of giving one, a monetary gift is an investment in a child, or other loved one’s, biggest goals and dreams.

With a monetary gift, you’re contributing to their future experiences, whether it be an around-the-globe adventure or the time they spend at college.

How to Gift Money

When we think of gifting money, we often picture handing over a check or cash to a loved one to spend as they wish. While that’s certainly an option, there’s a bit more that goes into it, especially when the recipient of said gift is a child.

Gifting money to reduce estate tax liability

For high-net-worth families, monetary gifts are particularly valuable. Not only is gifting money a way to show affection to your loved ones, but it can also help reduce your estate tax liability down the road.

It’s likely that, when you pass away, you’d rather have your money go to your loved ones than to the government in the form of an estate tax.

So how does this actually work?

As of 2021, the current estate tax limit is $11.7M. That means that the first $11.7M of your estate is tax-free. After that, a tax will be imposed at a frighteningly high rate of 40%.

At first glance, the estate tax probably seems like an absurd thing to worry about. After all, most families will never have $11.7M to pass onto their relatives. And while that’s true, the limit today won’t be the limit forever.

As recently as 2017, the state tax limit was $5.49M. Congress increased it in the 2017 Tax Cut and Jobs Act, but with a catch. The increase is temporary. 

And when that part of the law sunsets at the end of 2025, the limit is likely to decrease to its pre-2017 levels. It could drop even lower, as some politicians have suggested drastically reducing the estate tax limit.

Again, these amounts are very high, and many families will never have to worry about the estate tax. But if you save and invest well during your working life, you might be surprised at how much you’ll one day retire with.

Luckily, gifting money can help you reduce estate tax liability and ensure that your loved ones receive more of your estate when you pass away.

Rather than waiting until you die to pass along your wealth, you can strategically gift throughout your life, ensuring your loved ones keep a greater percentage of it. There are still other tax considerations, and we’ll get to those shortly. But they’re also easy to work around.

illustration small child with piggy bank

Gifting limitations and gift taxes

The federal government imposes a tax on large gifts from one person to another. 

Per IRS rules, a taxable gift is considered any transfer from one individual to another where payment for the fair market value isn’t made — in other words, selling an expensive item at a hugely discounted rate is also considered a gift.

Before you start to worry that you’ve been evading taxes all these years, know that the IRS allows each person an annual gift tax exclusion of $15,000. As a result, you can gift up to $15,000 to another person in a single year before you must file a gift tax return. 

Even once you file a gift tax return, you likely won’t have to pay the gift tax. The IRS also allows for a lifetime exclusion. 

In fact, your gift tax lifetime exclusion and your estate tax limit are connected. Any of your gift tax lifetime exclusion that you use up during your lifetime is subtracted from your estate tax limit.

There are plenty of ways around paying the gift tax or even having to file a gift tax return. With a gifting strategy in place, you won’t have to worry.

First, the annual exclusion applies both per donor and per recipient. That means that as a gift-giver, you can give up to $15,000 to multiple people without having to file a gift tax return. 

It also means that you and your spouse can each give up to $15,000 to an individual before filing a gift tax return. So, as a married couple, you can gift up to $30,000 per recipient per year.

There are also plenty of other gifts that are exempt from the gift tax, including:

  • Gifts to your spouse
  • Gifts to a charitable organization
  • Gifts to a political organization
  • Gifts made directly to a university or hospital on behalf of someone else to pay for tuition or medical expenses

So what does this mean for gifting to family members when you consider both the estate tax and gift tax rules?

If you have a high net worth and expect that you could be subject to one of those taxes, the best course of action is to gift consistently throughout your lifetime. 

By the end of your life, you’ll have slowly passed down your wealth to the next generation while reducing the portion of your estate that could be subject to the estate tax.

Gifting to Children

Finding the right gift for anyone can feel overwhelming. And somehow, it’s even more challenging when it comes to gifts for children. 

Should you choose a fun gift? A practical one? What about an educational gift? You want to give them something they’ll enjoy, but also something that will have a positive impact on their lives.

Gifts for now or gifts for later

One of the biggest questions when gifting for a child is whether it’s better to give them something they’ll enjoy now or something for later. After all, each phase of a child’s life feels so fleeting. Giving something they’ll enjoy today may not be quite as impactful as you’d like.

Instead, you can focus on giving things that will have an impact on their future, whether it be their teen years, the time they spend at college, or their early adult years.

Experiences over things

Gifting material items can be a great way to show someone you care about them, but the joy from these is often fleeting. That’s even more true when it comes to giving gifts to children.

Children change quickly, as do their interests. The toy you gift them when they’re a toddler will be forgotten by the time they start school. And that tech gadget you give the teen in your life is likely to be replaced by an updated version within the year.

But experience gifts truly have a lasting impact. While the material gift will be forgotten in a matter of months, an incredible experience shared with a loved one will create a lifelong memory.

Think back to the best gifts you’ve ever received. Chances are they weren’t toys or tech gadgets. They were family trips as a child, thoughtfully planned date nights with your partner, or memorable parties with your closest friends.

Data confirms that experiential gifts are more impactful. 

A study from Cornell University found that the joy that comes from an experience lasts far longer than that which comes from a material purchase. While happiness from a material item is fleeting, joy from experiences continues to build even after the gift has been received, thanks to the memories you create.

More than 78% of millennials report that they’d rather spend money on experiences over things. As a result, they’re devoting more of their own income to experiences. While there’s no guarantee this trend will continue in younger generations, it seems likely.

illustration family with small child

Gifting money to children

Cash is perhaps the most obvious way to gift money to a child in your life. No matter the occasion, cash or even a gift card is always a welcome surprise.

But, while cash might be the easiest and perhaps most enjoyable gift for the child right now, it’s not the most impactful. 

Instead, contribution to an investment account allows you to give them a meaningful gift while still contributing to their financial future.

The reason that investment gifts stand out so much is the magic of compound interest. As money sits in an investment account, it grows. As it grows, you have even more money earning money. The longer that money sits and the more that’s invested, the faster it compounds.

For example, a gift of $100 when a child is born is likely to compound to more than $555 by the time they turn 18. And that’s without contributing another dime. Imagine how much it would grow if you made annual or even monthly contributions. 

In fact, a monthly contribution of $100 in an investment account would result in more than $55,000 by the time the child turns 18. You’ve only contributed a total of $21,600, meaning your investment more than doubled.

(Image Source)

When you see the numbers laid out, it’s easy to imagine how an investment account filled with gifts from loved ones could help a child fund their biggest goals when they reach adulthood.

Now that we’ve talked about why investment gifts can be so effective, let’s talk about a few investment accounts you can use to save for a child in your life.

All contributions are irrevocable gifts, meaning you legally can’t take back the money once you’ve gifted it. Each asset in the account belongs to the child. Once the child reaches adulthood, they take control of the account and can spend the money any way they like.

  • A 529 college savings plan is a type of tax-advantaged account that families can use to save for a child’s college education. Families can contribute money throughout the child’s life. 

Once the child heads off to college, they can use that money to pay for their educational expenses without having to pay taxes on the money they withdraw.

  • A custodial IRA is a type of retirement account that an adult can open for a child. You can only contribute to this type of account if the child has earned income. 

It’s also only possible to contribute up to the amount of income they earned, with a cap of $6,000. As a result, this type of investment account may be better suited for older children.

What EarlyBird Brings to Gifting

EarlyBird is a simple yet innovative way to gift money to the children in your life. It’s an UGMA account, meaning you’re making an irrevocable gift to a family member that will grow and compound throughout their lifetime. When they reach adulthood, your gift will help them reach their biggest goals.

EarlyBird makes it easy for friends and family to collectively invest in a child’s financial future. Once the account is set up, everyone can contribute. 

As with other gifts, EarlyBird accounts allow the giver to deepen their emotional connection to the child they’re gifting to. You can also leave a short video message, meaning you create a lasting memory for the child.

Gifting to an EarlyBird account also helps to create a more secure financial future for the children in your life. 

Whether it’s your child, your grandchild, your godchild, or another child you love, you’ll have the confidence and peace of mind to know they’ll be equipped to reach their future goals thanks to your financial contribution.

The gifts the child receives will be carried with them into their early adult years, creating a lasting legacy. When they’re heading off to college, traveling the world, or buying their first car or home, they’ll remember the loved ones who helped them get there.

illustration man carrying small child on his shoulders


Gifting is one of the best ways to show the people in your life that you love them. With enough thought, you can share gifts with your loved ones that they’ll cherish for years.

Gifting for children, in particular, is an opportunity to have a meaningful impact on their future. Whether you’re gifting them cash or making a contribution to an investment account, your gift could help them reach their biggest goals.

If you’re looking for the perfect gift for a child in your life, consider contributing to an UGMA account and making both a financial and emotional investment in their future.

Download EarlyBird on the app store today to start investing in the kids you love.


This page contains general information and does not contain financial advice. All investments involve risk. Any hypothetical performance shown is for illustrative purposes only. Actual investment performance may be different for many reasons, including, but not limited to, market fluctuations, time horizon, taxes, and fees. Please consult a qualified financial advisor and/or tax professional for investment guidance.


EarlyBird Team

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Download EarlyBird today and start investing in your child’s tomorrow.
Get started with your first $10 on us, when you create an account today!
Download EarlyBird today and start investing in your child’s tomorrow.
Get started with your first $10 on us, when you create an account today!
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
Download EarlyBird today and start investing in your child’s tomorrow.
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