Investment Gifts for a Newborn

Why give an investment as a newborn gift?

Newborn gifts don't have a particularly long shelf life.

The outfit may fit for a few weeks. The toy may be forgotten within a year.

Money invested for the future has a much longer timeline. That's what makes birth an interesting time for a financial gift.

Money contributed when a child is a newborn has years to potentially grow before college or adulthood. Growth isn't guaranteed, but starting earlier gives invested money more time to experience compounding.

What accounts can you contribute to for a newborn?

Start by asking the parents what already exists. They may have opened, or plan to open:

• A 529 education account
• A UTMA or UGMA custodial account
• A savings account
• Another account intended for the child

If an account already exists, contributing to it may be easier than creating another one.

Some 529 plans also provide ways for relatives and friends to make gift contributions directly to an existing account. Ask the account owner for the plan's contribution instructions before sending money.

Can you open an account for someone else's baby?

Sometimes.

You don't necessarily have to be the child's parent to open certain types of account. 529 plans generally allow adults other than the parents to own an account with the child as beneficiary. UTMA and UGMA accounts can also have an adult custodian who manages property belonging to the child.

The exact requirements depend on the account, the provider, and applicable state rules.

Before opening something yourself, talk with the parents. Having several relatives independently create accounts for the same baby can make things more complicated than contributing to an account the family already uses.

Do you need the baby's Social Security number?

Often, yes.

Financial institutions and 529 plans typically require identifying information about the child when an account is opened. That can include the baby's Social Security number or other taxpayer identification information.

If you're giving the gift shortly after birth, that information may not be available yet. It's on the newborn money checklist for exactly this reason.

There's nothing wrong with giving a card explaining the gift and making the actual contribution once the necessary information and account are available.

What if you're a grandparent?

Grandparents have several possibilities.

You could contribute to an account the parents already opened. You may also be able to open your own 529 account and name your grandchild as the beneficiary.

Those arrangements aren't identical. Who owns the account affects who controls it, who can change the beneficiary, and how the account is handled later, which is the subject of grandparent 529 versus UTMA.

Before opening a separate account, consider whether contributing to an existing family account would accomplish what you want.

How do you give an investment at a baby shower?

Give the parents something they can open. That could be a card saying:

"We wanted to give something for the baby's future. Once the account is ready, we'd like to contribute $___."

You can add a book, an outfit, or another small gift if you want something physical to go with it.

The baby won't know what happened either way. But the parents will understand that the gift is intended to last longer than the newborn clothes.

Where MemoryBank fits

As the child gets older, MemoryBank can help make financial gifts like these visible. Families can connect supported savings and investment accounts they've already opened and give their child a simpler way to see what has been building for them over the years.

That can eventually turn a gift made when they were a newborn into something they can understand themselves.

MemoryBank is not a brokerage. It cannot receive, keep or transfer securities.

What should you do next?

Before giving a newborn an investment gift:

1. Ask the parents what accounts already exist or what they plan to open.
2. Find out whether relatives can contribute directly.
3. If you're considering your own account, check the provider's ownership and beneficiary requirements.
4. If the necessary information isn't available yet, give a card now and make the contribution later.

For questions about taxes, account ownership, or choosing between account types, consider talking with a tax professional or financial advisor.

Frequently asked questions

What is a good investment gift for a newborn?

A contribution to an existing 529 or custodial account is usually the simplest option. Ask the parents what they're already using before opening anything new, since several relatives opening separate accounts for one baby creates more work than it's worth.

Can I open an investment account for someone else's baby?

Depending on the account and provider, you may be able to. Adults other than the parents can potentially own a 529 with the child as beneficiary, or serve as custodian of a UTMA or UGMA. The requirements vary by provider and by state.

Can a grandparent open a 529 for a newborn?

Generally yes. A grandparent can typically own a 529 and name the grandchild as beneficiary, subject to the plan's requirements. Who owns the account affects who controls it and who can change the beneficiary later, so it's worth understanding before choosing.

Do I need the baby's Social Security number to invest for them?

Usually. Most accounts require identifying information for the child, often a Social Security number or taxpayer identification number. A newborn won't have one immediately, which is the most common reason a shower gift has to be promised now and funded later.

What can I give at the baby shower if the account isn't open yet?

A card explaining what you plan to contribute once the account exists, paired with a small physical gift if you want the parents to have something to open. The baby won't know the difference, and the parents will understand what's coming.

Can I contribute to a newborn's account through MemoryBank?

No. MemoryBank can display supported accounts a family has already opened, but contributions and transfers happen through the financial institution holding the account.