Holiday and birthday money: what should kids do with it? (2026)

Give the money a job before it gets spent. Most families can use the same four steps every time a birthday card or holiday envelope arrives, and adjust the details for the child's age.

Here is a parent script you can use today: "This money is yours. Before we spend any of it, we say thank you, and we sleep on it. Tomorrow you decide how much goes to your goal, how much you spend, and how much you give."

• Say thank you first: a note, a call or a drawing for the giver, ideally before any of the money is spent. Ideas by age are in the thank-you section below.
• Pause: anything bigger than a small treat waits one or two nights (24 to 48 hours). This guide calls it the waiting rule. It is a family rule of thumb, not a research finding, but it gives your child time to think before buying.
• Pick one goal: ask your child to name one thing they want to save for, and write it down with its price.
• Split: divide the money into save, spend and give. The CFPB (Consumer Financial Protection Bureau, a US federal agency) describes spending, saving and sharing as choices children learn to make with gift and allowance money during middle childhood, ages 6 to 12 ⁴⁶. Keeping each share in its own jar or envelope may help. In a 2011 field study with adult laborers in rural India, money set aside for savings was saved more when it was split into two envelopes, and printing the workers' children's photos on the envelopes increased saving further when the money was split ⁷. That study involved adults, so treat it as an idea, not proof for kids.

The honest answer: we could not find a reliable, recent national survey that measures how much cash US kids receive for birthdays or holidays. Treat any single "average" you see online with caution. Here is what credible surveys do show.

One caution on the 2022 figures: the T. Rowe Price question was hypothetical. It asked what kids say they would do with $100, not what they actually did with real gift money ¹.

• Grandparents are a big source of support. In an AARP Research survey of 3,283 US grandparents, fielded November to December 2025 and published in June 2026, 9 in 10 said they gave financial support to grandchildren in the past year, spending an average of $2,654 a year on all grandchildren combined ³. That figure covers all kinds of support, not only birthday or holiday cash.
• Many kids ages 8 to 14 say they would save. In T. Rowe Price's 2022 Parents, Kids & Money Survey of kids ages 8 to 14, 49% said they would save $100 if asked to choose between saving, spending or investing it, 29% would invest it and 23% would spend it ¹. Of the kids who chose saving, 79% said it would be for something they want to do or buy later ¹.
• What teens say they do. In a separate 2025 Junior Achievement survey of 1,000 US teens ages 13 to 18, run by the research firm Wakefield Research, 36% said that when they receive money they save part of it for their future, 23% save some for education and 13% invest ². That question was about any money teens receive, not gift money, and it used different ages and wording from the 2022 survey, so the two sets of numbers should not be compared directly.
• Gift cards are a common gift. The National Retail Federation reported in December 2025 that 43% of holiday shoppers planned to buy at least one gift card during the 2025 holiday season, with gift card spending expected to reach about $29 billion ⁹.

The percentages in this table are examples, not a rule from research. We did not find any study showing that one split works best. The save, spend and share idea itself matches CFPB guidance for parents ⁴; change the numbers to fit your family and your child.

If a giver said what the money is for, such as "for your college fund" or "for something fun", honor that first, then split whatever is left.

For most families, not all of it. If every dollar disappears into an account, kids miss the chance to practice choosing. The CFPB's Money as You Grow guidance for middle childhood (ages 6 to 12) suggests setting ground rules for spending and saving, then giving children the chance to make decisions and learn from the results ⁴⁶.

One middle path: a set share goes to savings automatically (for example, half), and the child decides what happens to the rest. The automatic part ends the argument; the part your child controls gives real practice.

This age range matters. The CFPB's 2016 Building Blocks report says financial habits and norms begin to form in middle childhood, ages 6 to 12, as children watch and interact with parents and caregivers, as well as peers, school, community and media ⁶.

There are fair exceptions. When a giver clearly meant the money for the long term, it is reasonable to save all of it and explain why. Large gifts meant for college or adulthood are a different case from birthday cash; see the grandparent section below.

Treat a gift card like cash that is easy to forget. In a 2024 Bankrate survey of 2,373 US adults conducted by the polling firm YouGov, 43% had at least one unused gift card, voucher or store credit, worth an average of $244 (median $100) among those who had one ⁸. In the same survey, 34% said they had lost money on a gift card: 20% let one expire, 17% lost one and 12% had the store close before they used it ⁸.

The rules help, but they have limits. Under federal law, gift card funds must be good for at least five years, and some state laws give more time, according to CFPB guidance last reviewed in 2024 ¹⁰. A 2012 CFPB blog post explains that federal rules ban inactivity fees (charges for not using the card) for the first 12 months, after which fees can start reducing the balance ¹¹.

• Write it down. Note the store, the amount, the card number and the customer service number, and keep it with your child's goal list. The same 2012 CFPB post suggests recording these details and using the card soon ¹¹.
• Count it in the split. A store gift card already has a "spend" job, so it can count as most of the spend share, and cash gifts can lean more toward the goal and giving.
• Use it within weeks, not months. Put a date on the calendar to plan what the card will buy.
• If the card is for a store your child never uses, a parent can use it to buy a gift for someone else, or sell or trade it. A Bankrate analyst said in 2024 that resale sites can often return at least 70% to 80% of a card's value ⁸.

Use the waiting rule from the four steps above (bigger purchases wait one or two nights). No study we found tests this exact rule, so treat it as a family habit, not a proven method.

Waiting is a skill worth practicing. The CFPB lists impulse control and the ability to delay gratification (choosing a later or bigger reward over a smaller one now) among the traits of adults with higher financial well-being ⁶. Keep expectations realistic, though. The famous "marshmallow test" is a classic experiment in which young children could eat a treat right away or wait for a bigger reward. A 2018 follow-up, using data on more than 900 children and focusing mostly on children whose mothers had not finished college, found that the link between a young child's ability to wait and later math and reading skills was small and disappeared once family background and early environment were taken into account ¹². Think of waiting as a habit you build together, not a test your child passes or fails.

• Make the goal visible. The CFPB's advice for young savers is simple: "Find a jar or can, and label it for saving." ⁵ Adding a picture of the goal is this guide's own suggestion.
• Split the money physically into separate jars or envelopes, as in the field study described in the four steps above ⁷.
• Decide at home, not in the store or in a shopping app. Make the shopping list before you go.
• Ask three questions before buying: Will I still want this tomorrow? Is there something I want more? Will I still use it next month?
• Let small mistakes happen. If your child spends the spend share and regrets it, that is an inexpensive lesson, and the CFPB encourages letting kids learn from the consequences of their decisions ⁴.

Yes, and both are part of the money lesson. Gift money comes from a person who chose to give it, and a thank-you note connects the money to that person.

People tend to underestimate how much a thank-you means. In experiments published in 2018 by researchers Amit Kumar and Nicholas Epley, people who wrote letters of gratitude underestimated how surprised and happy the recipients would feel, and overestimated how awkward it would be. Recipients responded mostly to the warmth of the gesture, not the polish of the words ¹⁴. That research was with adults, but the lesson carries over: a short, sincere note is enough.

Talk about giving, do not only model it. The Women Give 2013 study from the Women's Philanthropy Institute at Indiana University followed 903 young people ages 8 to 19 and found that children whose parents talked with them about giving were 20% more likely to give to charity than children whose parents did not. Role-modeling alone did not appear to be as effective as talking ¹³. This is an association, not proof of cause, and the data were collected between 2002 and 2008.

• Ages 6 to 8: a drawing, a dictated note or a short video call that names the gift.
• Ages 9 to 12: a short handwritten note that says what they plan to do with the money.
• Ages 13 to 18: a text or call is fine if it is personal and mentions the gift and the plan.
• Giving: let your child choose the cause, such as an animal shelter, a food bank or a school fundraiser, and talk about why they chose it.

Some gifts are meant for the future, not for this month. AARP Research reported in 2026 that about 23% of grandparents spend money on grandchildren's education and activities ³.

This section is general information, not financial, tax or investment advice. Rules depend on your state and can change, so check the official sources below or talk with a qualified professional before choosing an account.

• 529 plans: tax-advantaged savings plans for future education costs, sponsored by states, state agencies or educational institutions. Earnings are not subject to federal income tax when withdrawals pay for qualified education expenses; withdrawals for other purposes are taxed, with an additional 10% federal penalty on earnings. Investments can lose money, and 529 savings can affect need-based financial aid (SEC Investor Bulletin, January 2026) ¹⁵. Anyone can open a 529 plan and name any beneficiary, and contributions are not deductible on federal taxes ²⁰.
• Custodial accounts (UGMA or UTMA accounts, named for the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act): the child becomes the legal owner of the money at the time of the gift. An adult custodian manages and invests it until the child reaches the age of majority, then must transfer it to the child ¹⁶. The exact age can vary by state, so check your state's rules.
• Trump Accounts: a new federal account type for children. According to an IRS page updated in October 2026, contributions began July 4, 2026; individuals and employers can contribute up to $5,000 per year; the money must be invested in certain funds that track a US stock index; and it generally cannot be withdrawn before the year the child turns 18 ¹⁸. Children born from January 1, 2025, through December 31, 2028, who are US citizens with a valid Social Security number can qualify for a one-time $1,000 federal pilot contribution ¹⁹. Check IRS.gov for the latest rules before acting.
• Gift tax basics: for gifts made in 2026, the IRS annual gift tax exclusion (the amount you can give each person in a year without, in most cases, filing a gift tax return) is $19,000 per recipient ¹⁷. Larger gifts may need to be reported; see IRS.gov.
• Where to look: Investor.gov, from the US Securities and Exchange Commission, for 529 basics, plus the College Savings Plan Network from the National Association of State Treasurers to find each state's plan ¹⁵; IRS.gov for gift tax rules and Trump Accounts ¹⁷¹⁸.

Plain words usually land better than a lecture. Pick the script closest to your child's age and change the words so they sound like you.

• Ages 6 to 8: "This birthday money is yours. First we say thank you to Grandma. Then we sleep on it. Tomorrow we put some in your goal jar, some in your spend jar and a little in your give jar. You choose who your give money helps."
• Ages 9 to 12: "You got some holiday money. First, send a thank-you to whoever gave it. Then, before you spend any, write a plan: how much goes to your goal, how much you spend, how much you give. If you want to buy something, we wait a day or two. If you still want it then, it's your call."
• Ages 13 to 18: "This money is yours to manage. Start with a thank-you to Grandpa. I'd like to see your plan by the weekend: what you're saving for, what you'll spend and anything you want to give. If Grandpa said part of it is for college, that part goes to savings. The rest is your decision, and I'm happy to talk it through."
• If it goes wrong, at any age: "You spent it fast and now you wish you hadn't? That happens to grown-ups too. What would you do differently next time?"

Babalata is a money-habits app for US families with kids ages 6 to 18. It is launching soon on iOS and Android in the United States and is not downloadable yet. Babalata has no debit card or bank account and does not hold, move or transfer money: parents keep the real money, and the app records allowance, deposits and savings goals that families enter themselves. A family could record birthday money as a deposit toward a child's savings goal and watch the progress, or save together in a family goal. Short Money Gym lessons are built on a behavior model with four areas (Awareness, Impulse, Emotion, Future) and three skills (Notice, Pause, Build), and parents get a weekly family report, built from the week's activity counts, with conversation starters.