Gifts of money to children.

[~ Mylitta ~]

There will be a point where we will need to take the kids money and put it in our mortgage, otherwise they will be taxed on the interest. I am not looking forward to that day and having to explain that one to her

I'm going slightly off topic, but the kids accounts would have to have enough money in them that they are generating over $18,200 a year (each) before they even start to pay tax (as it's treated the same as normal income). In a pretty standard savings account that means they would have to have around $400,000 before they pay anything in tax. If you are worried about paying a significant amount of tax they would have to have a lot more than that in their accounts. If they are lucky enough to have that much then that's fantastic and I'd be giving MIL a pat on the back hehehe.

[~ Mylitta ~]

In response to the OP questions... I think it's ok for the giver to state their preference, but ultimately it's up to the parents or the child (if they are old enough). I'll admit that if money is given to my kids (who are 9mths, 24mths and 3years) I tend to just put it towards nice things that I would buy for them anyway. For example, some nice new clothes, or some Montessori activities, or craft supplies etc... I figure it's still for them and they get enjoyment out of it, so it's win-win