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TL;DR: Savings bonds can provide a safe, long-term investment with a solid potential upside for kids in your life. But the process to buy them and give them as gifts makes them an uncomfortable investment choice.
Savings Bonds were the financial gift of choice by many financially savvy aunts, uncles and grandparents.
They wanted to give the gift of a brighter future.
But a few things changed since those days.
Today, you can buy savings bonds either online or once a year through your tax return.
In 2011 the IRS stopped selling the paper version of Savings Bonds.
Today, you can buy savings bonds either online or once a year through your tax return.
The move made giving a Savings Bond as a gift a difficult process. Many elements of the presentation and personalization are no longer possible, like adding greetings and gift wrap.
Greatest Gift's financial gifting platform answers the need to give great financial gifts for kids.
Buying savings bonds is essentially lending money to the US government and earning interest in return.
Today, you can buy savings bonds online on the IRS Treasury Direct website. You can also order paper savings bonds once a year with your tax return forms.
There is no way to purchase savings bonds in person today.
There are two types of US savings bonds: Series EE bonds, and series I bonds.
Series I bonds track the inflation rate and are designed to protect owners from inflation.
Series EE have a one time doubling adjustment after 20 years. This guarantees an effective interest rate 3.5% per year.
Let's look at the pros and cons.
Savings bonds offer a low-risk investment, guaranteed by the US federal government.
Series I bonds are designed to protect owners from inflation.
Series EE’s are guaranteed to double in value after 20 years. That's an effective interest rate of 3.5% per year.
Savings bonds encourage saving for the long term.
On average, savings bonds have a lower rate of return than other more aggressive investments.
Waiting periods and penalties on early cashing may limit people’s options.
Savings bonds are managed on the outdated Treasury Direct website.
You may want to avoid the website and opt for a different investment, especially if you want to gift money to kids.
You can redeem US savings bonds as soon as they turn 12 months old.
If you cash them in before they are five years old, you will lose the last three months of interest.
You can cash in your electronic bonds through the TreasuryDirect website.
Some local banks and financial institutions allow cashing in paper bonds at their local branches.
As the child’s parent or guardian, you can redeem the minor’s paper bond at a local bank.
To redeem, you need to add a written statement stating that you are allowed to redeem the bond on behalf of the child.
See additional details on the TreasuryDirect website.
When you purchase a savings bond, you register the bond. The registration determines who owns the bond and who can cash it.
Giving financial gifts for kids is a great way to build generational wealth.
You can buy savings bonds as gifts in two way. The first is as a paper bond. The second is in digital form through the TreasuryDirect website.
To buy a paper savings bond as a gift, you’ll need to wait for your tax return.
To buy a paper savings bond as a gift, you’ll need to wait for your tax return
If tax season is too far away, or if you don’t expect a tax refund, you may be out of luck.
Consider buying a digital version instead or other alternatives.
Greatest Gift’s gifting platform is a more modern way to gift money to kids.
If you are owed a federal tax return, you can order your return in the form of paper bonds.
Use tax form 8888 to request that a portion of your return be paid in paper bonds.
Enter the child’s full legal name as the owner of the bond.
If you’re not sure what the legal name is, check with the kid’s parents.
Buying an electronic savings bond as a gift is the other option, but this is a clunky process, so brace yourself.
The child, the parent and you will all need to have TreasuryDirect accounts. Also, you’ll need to know the child’s full legal name and social security number.
Buying an electronic savings bond as a gift is the other option, but this is a clunky process, so brace yourself
First, sign in (or sign up) to your TreasuryDirect account.
Choose the bond you would like to purchase and add a new registration.
Enter the gift recipient’s name and social security number in the registration page.
Mark the box “This is A Gift”.
Complete the purchase to find the savings bond in your account’s Gift Box area.
Now, you’ll have to wait five business days before actually sending the gift over.
Once the five days are over, head back to your account and go to your Gift Box area.
Choose the gift you bought and click the Deliver button.
Add the child’s TreasyruDirect account number and confirm the delivery.
The bond will appear in the gift recipient’s TreasuryDirect account.
The gift recipient will also receive an email announcing the gift.
The awkward process to get savings bonds as gifts drives many to seek out other ways of giving monetary gifts.
To purchase an electronic savings bond for your child, first open a TreasuryDirect account for yourself. Make sure you have your social security number and bank account information ready.
Next, set up a Minor Linked Account. To do this, log in to your account and go to the ManageDirect tab at the top of the page.
From there, click on “Establish a Minor Linked Account” and complete the minor account registration process. You’ll need the child’s social security number to complete this.
To open a minor account, you need to be a parent, guardian, or the person who financially supports the child.
Now that you have an account and a linked account for your child, you can purchase savings bonds.
Log in to your TreasuryDirect account and then to the child’s minor linked account. Purchase the savings bonds you want through the linked account.
Choose the Savings Bond series you prefer, the purchase amount and the funding source.
What happens when the minor turns 18?
You can either de-link the account and hand it over to your child. Or, keep the account linked and continue purchasing bonds for your kid.
If you are owed a federal tax return, you can buy a paper Series I bond for your child in multiples of $50.
Use tax form 8888 to request that a portion of your return be paid in paper bonds. For the owner of the bond, enter your child’s full legal name.
The easiest way to buy savings bonds for your grandchild is by buying a Series I Paper Bond during tax season.
Use tax form 8888 to request that a portion of your return be paid in paper bonds. Enter the grandchild’s full legal name as the owner of the bond.
When you get the bonds delivered in the mail, add a nice bow and give as a gift to the parents. Or, keep it yourself for safekeeping until the child is older.
The easiest way to buy savings bonds for your grandchild is by buying a Series I Paper Bond during tax season.
Unfortunately, it’s not easy to buy an electronic savings bond for a grandchild.
You can only open a minor account if you are a parent, natural guardian, or the person who financially supports the child.
Otherwise, you can purchase the savings bond as a gift electronically. You’ll need the child’s full legal name and social security number.
There are easier ways to give financial gifts for your grandkids.
Greatest Gift’s financial gifting platform turns investing in a child’s future into a gift that you can send to grandkids. It continues to show parents how to save and invest for the future.
All you need is the parent’s phone number or email.
The only silver lining is the potential value (although there are some caveats there).
Series EE Savings Bonds are guaranteed by the US government that their value will double. That's if you hold them for 20 years at least.
That guarantee makes the bond’s effective interest rate 3.5% per year, not bad for a government backed investment.
There are a few things to consider though. The bonds must be held a minimum of one year and cannot be redeemed before that. If redeemed before five years pass, the bonds incur a penalty equal to the last three months’ interest gains.
That guarantee makes the Series EE bond’s effective interest rate 3.5% per year
And don’t forget, if you don’t hold for 20 years, the interest and earnings could be significantly lower.
Instead of buying savings bonds as gifts, you can try other ways to invest for kids in your life.
Here are just a few options:
Greatest Gift is the financial gifting platform for children’s long-term savings. It lets you invest in a child’s financial future in a fun and meaningful way.
Gift receivers get to choose how to use the gift funds and are encouraged to save for the long run.
Greatest Gift provides a frictionless process to send financial gifts for kids' futures.
Financial gifts can be redeemed at UTMA accounts, custodial accounts, 529 plans, high-yield savings accounts, or other bank accounts.
Perhaps the easiest way to give monetary gifts is to write a check or to give cash gifts.
However, cash & checks have their limitations. Checks are prone to errors and handing over cash bills can signal lack of effort.
While cash can be used for anything, it’s usually spent quickly, not saved. Other options may be preferable if you want the gift to go towards a long-term goal.
Giving stocks as gifts can have a great impact on the gift receiver, both financially and educationally. A kid-friendly stock can provide a valuable lesson in investing.
However, giving stocks to another person isn’t easy.
You’ll both need to have brokerage accounts, and you may need the gift receiver’s social security number as well.
529 plans are a popular way to save for college and other higher education.
You can make a contribution to an existing 529 plan or open a 529 plan that you manage for a child.
529 plans have a lot of potential upsides to them.
As long as you use withdrawals for qualified expenses, the account does not incur taxes on gains.
Custodial brokerage accounts, AKA UTMA accounts, are custodial investment accounts owned by a minor and managed by an adult until the child comes of age.
Money held in UTMA accounts can be used to purchase stocks and other investments and grow over the lifetime of a child.
Since they are owned legally by the child, custodial brokerages offer additional tax savings.
Most UTMAs don’t allow direct gifting into their accounts. Instead, you can use Greatest Gift to send money to the parents and have them redeem the funds at the child’s investment account.
Kids that have a minor linked TreasuryDirect account under their parents can set up their own account when they turn 18.
Parents can de-link minor’s account and transfer the securities held in the account to the new account set up.
The young adult can now choose what to do with the bonds – redeem them, partially redeem them, or keep them until they mature.
Savings bonds are safe, can provide a good rate of return, and encourage long-term savings.
However, giving a Savings Bond as a gift is a difficult process.
You, the baby’s parent, and the baby will all need to have a TreasuryDirect account. You’ll also need to provide the baby’s full legal name and social security number.
However, giving a Savings Bond as a gift is a difficult process.
The website is old, and you’ll need to hold the gift in your account for five business days before you can “deliver” the gift.
To get a paper savings bond, you’ll need to time the gift with tax season.
Instead, consider getting a different financial gift.
Check out Greatest Gift’s financial gifting platform for children’s long term savings.
I love how easy it is to give a meaningful gift to the kids and tots in my life!
It means a lot to me that I can contribute to their future, and Greatest Gift makes the experience seamless and fun.
Alana S.
Our son just turned two. We created his gifting page with Greatest Gift and shared it on the birthday evite. The results were amazing! We received 12 gifts that will be going to his college fund and savings.
Love this platform.
Daniel A.
We have a 2-year-old and another baby on the way, and we love Greatest Gift’s discover section. I look forward to learning about the right financial tools to help build their future and set them up for success financially.
Hillan K.
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