Savings Bonds as gifts for grandchildren and others
Tuesday, September 14th, 2004
Categorized as: Savings Bonds as gifts and prizes
I am a grandmother interested in buying savings bonds for my grandchildren. I am clueless and am wondering if this would be a better way for me to save. Right now I have a savings account at my bank for them, but it does not draw a lot of interest.
Paper Series EE Savings Bonds are often used as gifts. A hidden reason for their popularity is that Series EE bonds are purchased at half of face value. So you can give a Savings Bond that has $100 printed on it, even though its cost to you and its true value is only $50.
Series I bonds and both Series I and EE electronic bonds at TreasuryDirect are sold at full face value and are used much less frequently as gifts. But if making an electronic gift interests you, see my post on Savings Bond gifts in TreasuryDirect.
In most states you can purchase gift Savings Bonds at most banks and other financial institutions. When you purchase the bond, you can make anyone the owner. The recipient of a gift bond can live virtually anywhere in the world.
When you purchase the gift bond, you do have to provide a Social Security Number, but it can be either yours or the recipient's. The Social Security Number you provide isn't used for tax purposes; instead, it's used primarily to track the bond in case it's lost. (Government agencies providing benefits that require the recipent to have limited assets also routinely do a Savings Bond SSN check.)
Because of its lost-bond tracking function, it's best to provide the gift recipient's Social Security Number. No one ever thinks to look for their lost bond under grandma's SSN.
It's important to understand that when you buy a gift bond, the bank doesn't hand it to you on the spot. The bond will be mailed out by the Treasury and typically takes about three weeks to arrive.
You will also have to provide the mailing address that you'd like the Savings Bond sent to. You can provide your own address or you can have it mailed to the recipient.
If you have it mailed to the recipient, make sure you remember to tell the recipient who the gift came from. When the Savings Bond arrives, there's no way for the recipient to tell who purchased it
People ask me all the time how to trace the giver of a gift bond, but it can't be done. So you're not going to get a Thank You note from Jennifer unless you tell someone about the gift.
Alternatively, you can have the gift Savings Bond mailed to your own address. When you do this, your name and address will be printed in the mail to area on the bond. Jeremy can remember you when he cashes it! And you can present it to Jeremy in person.
Because of the three-week wait for the bond, which givers sometimes forget to plan for, the Treasury provides banks with certificates that announce the gift, but banks don't always have them at hand. Click here for my post about downloadable Savings Bond gift certificates.