Can you gift a certificate of deposit (CD)?

Core Concept - A certificate of deposit (CD) can be a valuable gift that promotes financial literacy and investment in a loved one's future, though it has certain limitations and considerations [1]. Gift Rules - CDs must generally be opened in the owner's name, making it impossible to gift a CD directly to another adult. However, custodial accounts for children can be established, such as UTMA or UGMA accounts [2]. - Funds in these accounts belong to the child, with UGMA accounts allowing withdrawals only when the child reaches a specific age, typically between 18 and 21, while UTMA accounts allow custodians to withdraw for the child's benefit [3]. When to Consider Gifting a CD - Gifting a CD can be suitable for occasions like birthdays, holidays, or high school graduations, and serves as a tool to teach children about money management [4][5]. Steps to Gift a CD - Decide on the Amount: Consider financial goals and the minimum deposit requirements, which can range from $100 to $10,000 [7]. - Choose a Term Length: CD terms can vary from one month to five years or longer, providing flexibility in managing the account [8]. - Shop Around: Research different banks for better terms and interest rates, rather than simply using the current bank [9][10]. - Submit an Application: Open the custodial account online or in person, providing necessary personal information and the child's details [11]. Pros and Cons of Gifting a CD - Pros: - Invests in the child's future, providing a financial head start [15]. - Offers a safe, guaranteed return with fixed interest rates [15]. - Predictable earnings help illustrate the concept of compound interest [15]. - Cons: - Loss of access to funds once deposited, with no ability to change the beneficiary [20]. - Potentially lower returns compared to other investment options [20]. - Requires careful timing for maturity dates to avoid penalties for early withdrawal [20].