But that money really belongs to the child from the get-go.
Q: What do most parents do wrong in this situation?
A: They do many things wrong. Mostly it is because they lack experience in these areas, and have no objectivity. When it is your kid, it is so easy to lose perspective.
That is why I strongly urge parents to work with experienced professionals as a sounding board. It is treacherous terrain, and they need to make sure everything is being done in the child's interest.