I’d like to give my niece a savings bond as a graduation gift. I understand that I can’t buy paper savings bonds anymore. What do I need to do to give her a bond?
Although the government no longer issues paper savings bonds, it’s still easy to give bonds as gifts -- and they’re much easier to keep track of than paper bonds. Begin by opening a TreasuryDirect account, which takes about 10 minutes, says Jerry Kelly, of the Bureau of the Public Debt. To set up the account, go to the TreasuryDirect information page, then go to the Gift Box feature, which lets you buy bonds online. As always, you’ll need to provide the recipient’s full name and Social Security number.
To receive the bond, your niece will have to open a Treasury Direct account, too, if she doesn’t already have one. (If she is younger than 18, her parents will need to open a minor-linked TreasuryDirect account on her behalf.) Put your niece’s TreasuryDirect account number on the Delivery Request page, and the savings bond will be transferred to her account. She doesn’t need to do anything to receive the bond after her account is set up. The bond starts earning interest as soon as you buy it. It can be transferred one business day after the purchase, but you don’t have transfer it immediately. If you’d like to give her the gift in person or by mail, you can print out a gift certificate from the site.
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See the TreasuryDirect FAQs for more information about opening an account and transferring a bond.
As for the type of bonds available, you can buy both series EE and series I bonds as gifts through TreasuryDirect. These bonds are safe investments, but they’re earning very low interest right now. EE bonds are earning just 0.6% interest, which is locked in for the life of the bond. As an incentive to long-time bondholders, EE bonds are guaranteed to at least double in value if they are held for 20 years, regardless of the interest rate. I bonds are earning 2.2% interest -- a variable rate that is adjusted every six months based on the inflation rate (measured by changes in the consumer price index for all urban consumers, or CPI-U). See the http://www.treasurydirect.gov/tdhome.htm TreasuryDirect Web site for more information about both types of savings bonds and how interest is credited.
For more gift ideas that can help new grads with their finances, see 10 Smart Gifts for College Grads and 6 Tax-Smart Ways to Help Your Kids (or Grandkids).