Just imagine, it’s a birthday, wedding or other significant milestone celebration and you’ve been wracking your brain trying to determine the best gift for your loved one. Maybe you’ve landed on the simple gift of money, because let’s face it, life is busy, giving cash is easy and more than half of Americans say that’s the gift they prefer anyway!

Understanding when is the appropriate time to gift money and better yet, how much you can give someone, can prove challenging.

Avoid embarrassing moments with a few guidelines to follow when giving money as a gift.

A few general rules of thumb

  • Understand the appropriate time to give a gift of money. There are general expectations for all celebrations.
  • Understand if there are standard expectations for the upcoming celebration.
  • Do not give more money than you can afford. Don’t break the bank trying to impress someone.

When receiving money

If faced with a quandary to give a gift of money or not, the giver should be driving the final decision.

As the gift recipient, never ask for money (unless you want to look greedy). No matter the size of the gift of money, always practice gratitude and share your generosity. Consider sending a simple thank you note expressing your appreciation and sharing how the money impacted your life.

And always, keep the amount confidential (bragging is not only disrespectful, but it could also tempt those around you to target you for their own money requests, or worse, theft).

When giving money

First, know when it’s appropriate to give money. Consider sticking to major life events for close relationships. (However, a word to the wise, giving cash to your significant other, for any occasion, is likely not the best idea.)

A gift of money can certainly make things easy for you as the giver. And, on the plus side, it’s highly unlikely that someone will regift it.

Consider the following:

  • How much money are you comfortable giving?
  • How important is the occasion you’re celebrating?
  • How close is your relationship with the recipient?

Money gift benchmarks

One of the biggest challenges when giving money is determining the appropriate amount.

  • Birthday money
    • It appears that the general amount for a birthday celebration is around $25, no matter the relationship.
    • Money etiquette experts suggest spending $10 to $20 for classmates while expanding the budget to $25 for close friends, $50 for relatives and upwards of $100 for your own children.
    • Ever heard of a Fiver party? A newer trend for younger birthday parties that has parents feeling relieved as constant gift-givers is a “fiver” party. In lieu of gifts, each guest brings $5 in a card for the birthday boy or girl. The guest of honor can then utilize the collective pot of money to choose their own gift (or save for a future purchase or experience).
  • Graduation money
    • In a lifetime, each person will go through several rites of passage, with graduation being one of the most significant. In these celebrations, money tends to be standout as the most useful gift as the recipient has many expenses ahead for their new stage of life. The average amount of money for a graduation money gift is about $50.
  • Wedding or baby shower money
    • The same holds true when evaluating how much to give for showers. Determining the appropriate amount of money for the guest of honor relates to how close your relationship is with them. The following cash amounts are generally acceptable: $20 to $25 for a co-worker or acquaintance, $50 for a close friend and upwards of $100 for a family member.
  • Wedding money
    • Of all of the life celebrations, weddings typically translate to an acceptable time for giving a gift of money.
    • According to Brides.com, most guests will spend on average $75 to $200 on a wedding gift for the couple.
    • Another factor in the gift amount is if you’re attending solo or with a date. Be mindful of the relationship you have with the couple, but most often, $50 to $75 in cash is acceptable when solo.
    • If you’re not able to attend the wedding, consider sending a gift from the couple’s registry or sending a check. The general amount when not attending the nuptials is around $50.
    • While we all know that weddings can be pricey, The Knot created a theory to help wedding guests understand a generalized budget. First, identify a total budget amount for all expenses involved in the wedding. Then, break down each of the following for the overall total you’ll spend on gifts:
      • 20% of your total budget for the engagement
      • 20% of your total budget for the shower
      • 60% of your total budget for the wedding
    • Funeral money
      • Understanding how much money to give in all life events can be challenging, but even more so with funerals as they tend to be emotionally draining.
      • It is common to see individuals identify a cause or charity where people can donate or support in lieu of flowers. Consider sending your condolences with a sympathy card, including a personalized message expressing your thoughts and providing a respectful message about your donation.
      • Regarding how much money to give at a funeral, consider offering the amount equal to a floral arrangement. This cost can generally range from $50 to $75.
      • While a funeral can be an incredibly sensitive time, remember to consider the requests of the grieving family and at the end of the day, the kind gesture goes a long way.

Understanding gift tax

According to smartasset.com, the IRS defines gift tax as “any transfer to an individual, either directly or indirectly, where full consideration is not received in return.” In simpler terms, there is a limit set by the IRS for the amount you can give annually and over the course of your life. If you go beyond those limits, you will need to pay tax on the amount over the limit, also known as gift tax.

In 2021, the annual gift tax exclusion is $15,000. As a giver, you do not need to worry about being taxed on any gifts that are equal to or less than this annual limit. You will, however, need to file tax forms with the IRS for the amount above the $15,000 and may also have to pay taxes on it. (Tax rates in these instances range from 18% to 40%, according to smartasset.com.) Notably, there is a lifetime gift tax limit for taxpayers allowing individuals to give up to $11.58 million over a lifetime without paying gift tax.

Lesson here, if you’re generous enough to give someone a large sum of money, consider keeping it below the gift tax limit of $15,000 annually.

Understanding how much money should give can be challenging across all of life’s milestones. Always remember that the thought goes a long way. Using these money etiquette tips can guide you the next time you’re feeling confused about the appropriate money gift amounts.

When all else fails, if your budget seems minimal, consider pooling your money with a group. Check out our drama-free group gift etiquette blog post for help navigating shared gifts.