One Christmas, they’re pushing a toy truck across the living room rug. A few blinks later, they’re saving for a car that starts on a North Country morning in January.
A UGMA account for kids through Fabric by Gerber Life is one way to give a little to both versions of that kid. As a mom and a Nonna, I still want to give the toy truck, with a bow they’ll yank off before I’ve found my coffee. I like leaving a little room in the gift budget for the day the keys are real, too.
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How a UGMA Account for Kids Works
UGMA stands for Uniform Gifts to Minors Act. An adult, called the custodian, manages and invests the money for the child’s benefit. Every contribution is a permanent gift. The money belongs to the child as soon as it goes in.
At the transfer age set by state law, the child takes control. They might use the money for a security deposit on a first apartment or tools for a new job. They can also leave it invested. For more on ownership and the handoff, see FINRA’s guide to custodial accounts.
Starting when they’re young gives the money more years in the market. The balance can rise or fall in that time, and the child could end up with less than the family put in.
What to Check Before You Contribute
Fabric lists a $20 initial deposit and an administration fee after its trial. The fee is $3 a month for one account or $5 a month for multiple accounts. At $36 a year for one account, it’s worth comparing the annual cost with what you expect to contribute, especially if you’re planning a few small gifts. See the SEC’s guide to investment fees.
Investment income can come with a tax bill or a filing requirement. The rules depend on the type and amount of income and the child’s circumstances. See the IRS guidance on children’s investment income.
A UGMA account can affect need-based college aid. When the FAFSA requires a student to report investments, a UGMA account they own generally counts as a student asset. See Federal Student Aid’s FAFSA checklist.
How to Give It as a Holiday Gift
If you’re giving as a grandparent, aunt, uncle, or family friend, ask the child’s parent whether there’s already a custodial account. You can give the gift money to the custodian to deposit. If the family wants to open an account, decide who’ll manage it and check the costs and transfer age before anyone contributes.
Say you’ve budgeted $40. You could spend $20 on something to unwrap and put the other $20 toward the account, if that meets the provider’s contribution minimum.
If a few relatives want to chip in, ask one person to coordinate with the custodian. Set a date for everyone to send their part, then fill in the certificate once the gift goes into the account. If you want to do it again for a birthday or next Christmas, you can pick an amount that fits that year’s budget.
Print a UGMA Gift Certificate for Their Future
I made a free printable gift certificate for the envelope. Once the money goes into the account, fill in their name, yours, the amount, and the date. The sheet prints two certificates, so you can cut one out and tuck it into their Christmas card. Bonus points if a toy truck delivers it.
I’d tuck the envelope into the bed of the truck and tie it down with a little ribbon. Inside, I’d slip a note about something I love watching them do right now. Maybe they’re practicing the same two chords on a guitar or cutting paper snowflakes for every window in the house. Years from now, that note can remind them of what mattered to them that Christmas.
When they’re curious about the balance, the custodian can show them how much went into their UGMA account, and what it’s worth now. I’d ask what they’d use it for someday and see how their answer changes as they get older. For more ways to keep that conversation going, see my post about teaching kids about money.
Someday, I’d love to hear what they chose to do with it. Maybe they’ll put it toward their first trip with friends or a class they’ve been waiting to take. I hope it’s something I never would have thought to put under the tree. I’ll be the one asking for a picture when they get there.
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