How best to save my kid's own money?

[Icecreamarsenal]

My kid is a little older than 2 currently and she regularly receives small cash gifts from friends and family.
What is the best agreed upon way to save her cash without comingling with my funds (which is what I'm doing currently)?
I've tried searching but I get an 'error' message; perhaps it's been covered before.  If it has, please direct me to the relevant forum post.  Thanks!

[seattlecyclone]

Go to your favorite bank or credit union and ask to open a savings account for the kid.

If they eventually get enough that investing it makes sense, an UTMA account is a good option.

[clarkm04]

We put all cash gifts into our son's 529 education plan.

Our state even offers a tax deduction for our contributions to his account.

[bogart]

Our credit union allows kids to have savings accounts with a modest ($25) minimum balance, and pays them a (very) marginally higher interest rate than it pays grown-ups, plus various promotions/literature to encourage them to save.  Is something like that an option?  We set up 2 account for DS (both at the credit union), a savings account that is for "his" money e.g. stuff people give him as gifts to spend on things he wants, saved allowance, and a money market account that is for larger amounts of money that (e.g.) people give him that isn't for him to spend directly but for us to use on his behalf.  Obviously the fact that we have this range of gifts on behalf of DS marks us as pretty privileged, so there's that. 

[Icecreamarsenal]

Thanks for the replies.
Kid is lucky in that grandfather has a funded 529 for her  (how come I never got a dime?)
Kid is only 2 so far, but will open up her own account and xfer funds for her.
Any experience on UTMAs or UTFAs?

[~Ari~]

Our credit union allows kids to have savings accounts with a modest ($25) minimum balance, and pays them a (very) marginally higher interest rate than it pays grown-ups, plus various promotions/literature to encourage them to save.  Is something like that an option?  We set up 2 account for DS (both at the credit union), a savings account that is for "his" money e.g. stuff people give him as gifts to spend on things he wants, saved allowance, and a money market account that is for larger amounts of money that (e.g.) people give him that isn't for him to spend directly but for us to use on his behalf.  Obviously the fact that we have this range of gifts on behalf of DS marks us as pretty privileged, so there's that. 

This is what we did, and seems to be working out well! Our DS is only 8 months old, but we set up these accounts right away when he was born at our local credit union. One account we use for the money he gets as a gift and for him to use as he pleases once he's older. The other is an UTMA account that he has no access too and cannot withdraw from until he's 18 and has our consent. This is an account that we put money into each week (our plan is that this money will be used as a graduation and/or wedding present). Both have great interest rates for a bank savings account (1.75%).

[kanga1622]

We just opened savings accounts in my husband/my name (joint accounts) and have "earmarked" them for our kids' needs. We also have 529s that get deposits a couple times a year as well. While the savings accounts don't have our kids names on them and they cannot access them, we plan to use that money to help them buy their first car, pay for college/tech school/training program, or to be a down payment on their first home. That money is designed for them and we won't spend it on us, but we wanted some of it available to use for expenses other than college.

[merula]

My kids get very small cash gifts (as in, their ages in dollars for their birthdays), and I've been saving them in envelopes for them to spend as they wish. I want to teach the lesson very early on that if you spend money on the first thing you see, you won't be able buy something you might want more later.

There's about $15 in each envelope right now, so the forgone interest isn't really something I'm worried about.

[tonysemail]

I've tried searching but I get an 'error' message

The search function built into the forums is broken.
Type this into Google to have it search the forums:
site:forum.mrmoneymustache.com 529
site:forum.mrmoneymustache.com UTMA

Based on past threads, the only concern with UTMA accounts is that you would want to spend them down to $0 before applying for FAFSA.
Grandparent 529's have some special treatment in FAFSA too.
IIRC, they do not count as part of the child's assets, but any distribution counts as income for the following year's application.