Recently, the subject of cash gifts came up between my wife and I. Her grandparents both give us moderately sized cash gifts each year (between $50 and $1000, to give a range) as a Christmas gift. In years past, we have almost immediately spent these gifts on some sort of material item, often contributing some of our own money to buy something expensive.

This year, I wanted to do something different with it. I suggested to my wife that we save or invest that money instead of just buying something silly with it. Her argument in response was that it is given as a gift for enjoyment, so we should enjoy it.

Her argument does have a degree of validity with it. When we receive the gift, it is usually with the stipulation that we “do something fun” with it because we “work so hard.” My argument is that we should indeed do something fun with it – but we should save their gifts for something really special, like a trip to DisneyWorld when our son is nine or ten years old. My thought is that if we tell them that we have a long term goal like this and we’re investing the money until then so that we maximize what we have when we go on the trip, they’ll be thrilled. Of course, investing the money now means that her grandparents might not survive to see us really appreciate their gift.

I guess the question is what is the most appropriate way to handle small cash gifts? My feeling is that once the gift is given, it’s up to you to determine what to do with it, and investing it doesn’t necessarily mean that you won’t end up doing something enjoyable with it.

On the other hand, I visualize the reaction of my wife’s grandparents when they receive our thank you note and we tell them that we took their money and bought a five year treasury note.

I suspect that we’ll go back and forth on this until Christmas.