Why electronic EE Savings Bonds aren't sold at half face value
Thursday, March 30th, 2006
Categorized as: Series EE US Savings Bonds • Buying US Savings Bonds
When you buy a Series EE Savings Bond electronically on TreasuryDirect, the amount you invest appears in your account.
When you buy a paper Savings Bond, on the other hand, you receive a bond that has a face value of twice what you invested (for example, a $100 bond for a $50 investment).
It always surprises me how many people think that the paper bonds must therefore somehow be a better deal. I've been answering questions about this since I opened this web site (for example, see Savings Bond face value confusion)
Don Taylor, who answers investment questions at Bankrate.com, answered the same question yesterday in his post, A savings bond mystery revealed, and included an extensive quote from Savings Bond spokesperson Stephen Meyerhardt.
First, let me gently make the point that neither Taylor nor Meyerhardt said directly - you will end up with exactly the same amount of money from electronic or paper EE Savings Bonds. Electronic EEs are even guaranteed to double in value in 20 years, just like the paper ones.
Next, let me ferociously make the point that putting a face value on paper EE bonds of twice the actual investment has always been nothing but a marketing gimmick. As Meyerhardt says, it has caused no end of confusion and ill will, since it allows people to give gifts and prizes that are actually worth only half of what they appear to be worth.
To me, one of the great things about TreasuryDirect is that it didn't indulge in an electronic version of this gimmick, but instead put an end to it.
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An interesting statistic would be what percentage of EE bonds given has gifts have never been redeemed even after 30 years. Seems like people who receive these as gifts would more likely misplace it and forget about it. People who have bought EE bonds on their own would likely have a process that will ensure they don't lose track of the bonds.
So it seems the Treasury might have a lot to gain by making EE Bonds attractive for gift and prize givers.
Ken - the Treasury doesn't have a reliable way to identify which paper Savings Bonds are gifts.
I agree with you that gift bonds are often lost. However, because gift bonds are typically purchased in small demoninations they aren't a significant percentage of all dollars invested.
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