Savings Account for Nephew

[shelbyautumn]

My husband's sister and her husband have struggled with their finances, so we decided this past Christmas that we're going to set aside money for our nephew instead of giving him traditional Christmas and Birthday gifts. He doesn't need anymore plastic crap.

We currently have about $600 for him sitting in an Ally savings account, but we'd like to put it somewhere that can grow a bit more. Our intention for the money is so he can put it towards a car, college, general savings, etc. It won't be a lot of money (probably $3k max), but every bit helps!

We don't want the money to be restricted to a singular use or time frame, but we also want to have some say on when he'll get the money and how he'll use it. For that reason, I don't think a 529 or Trust are good options.

Should we just put the money into a Betterment account, let it grow, and know that it's specifically for him? Is there another option that I'm not thinking of? I need advice!!

[Kapiira]

I have a travel account for our nieces and nephews.  I opened a non-tax advantaged investment account and bought shares of some index funds.  I use just the one account for all the kids and use a spreadsheet for tracking.  When they're ready to use the money I'll sell the appropriate number of shares and hand over the cash.

[reeshau]

Your idea sounds fine.  With the amount you are talking about, you will be under the gift tax limit.  And even if you eventually have more, you can get around that by paying for things directly, like tuition.  Two caveats:

1)  using Betterment might be a little fancy for a small amount.  A total market fund or even S&P 500 would probably be enough.
2)  If you think you will use it within 5 years, you might be better off with some or all just earning puny interest in a savings account.  The stock markets are at a high.  A withdrawal in the short-term may be at a market low.

[shelbyautumn]

Thank you for the tips @Kapiira and @reeshau!