For decades the savings bond was the gift you knew would last past the year. That was the idea. It was the easiest way to gift money that would grow over time.
A Little History
The bulk of the savings bonds I got as a kid happened before I was teenager. I may have received some for eighth grade graduation, since all those bonds were earmarked for college. A savings bond gift with 4 years to go was a wise and safe investment. In the end, I had enough to buy a semester of books and a few late night pizzas – which was the point. Looking back, you have to wonder what that money would have grown to under a solid investment plan. And how many more pizzas I could have purchased as I studied for exams.
I can’t complain too much. The rates on those savings bonds were great compared to the interest rates we have today. Back then, there really wasn’t any other option either. You couldn’t open a brokerage account with $25, $50 or $100. That would barely cover the brokerage fees. The internet didn’t even exist yet. Discount brokers hadn’t been invented. Those two missing pieces would eventually bring investing to the masses. The low-cost transaction fees and easy account access of today almost makes the savings bond a thing of the past.
In fact, you can’t even drive down to your local bank anymore and buy a savings bond. That was finally done away with back in January ’12 when the Treasury went electronic. Now, to buy a gift bond, you have to first open a TreasuryDirect Account, have the recipient’s social security number, and finally the recipient’s TreasuryDirect Account number to deliver the bonds.
Asking for personal information is an awkward way to send a gift. If that’s not enough, the bonds come with penalties if you redeem them inside of five years. Basically, there has to be a better option.
The New Gift Option
The most ideal solution I’ve found is the Betterment gift registry. You can set up a registry for yourself, your kids and your future kids. Then send the link to friends and family who want to help with your long-term goals. They can give as much as they’d like to goals like retirement, buying a home, or just saving for the future – and all of that money is invested in a Betterment investing account (read our Betterment review to learn more).
It’s the 21st century version of the savings bond, and the best solution for those would-be savings bond gifts outside of using a discount broker.
Gifting money with savings in mind isn’t awkward anymore. And you don’t need anyone’s social security number to make it happen. As long as the person has a gift registry, you can send them daily gifts if you want. Plus, it still teaches kids the benefits of saving and investing early in life.
So as you brainstorm ways to give a gift with true value to your children, grandchildren, or just friends and family this holiday season, don’t cross that savings bond idea off of your list. You can still give the gift of investment – along with some investment education – in just a few clicks of the mouse.