Comments on: Savings Bonds as Gifts for My Children: How Should I Handle Them?

By: emily

emily — Fri, 21 Nov 2008 14:17:05 +0000

im 14 and im cashing mine in so let them wait untill my age, and ask them!!!

By: Sally

Sally — Wed, 18 Jun 2008 20:44:49 +0000

Seriously – you would ask them? Are we talking big $$ here? I have a few for $50 and $100 – they are getting cashed – and in this case some in his savings. We will start Roth IRAs for the kids when they are 18 which isn’t too far away.

Bottom line – a GIFT is a GIFT. Once it is given – you do what YOU want with it.

By: Jeff Frese

Jeff Frese — Fri, 06 Jun 2008 19:47:10 +0000

I started a company that lets anybody in your circle of friends and family gift directly into your child's 529 plan. So instead of another Barbie Doll or shirt from the Gap people can gift into your child's plan. It's a simple site and concept that helps people save for college and give meaningful gifts. The site is www.freshmanfund.com I also write a blog on saving for college the site is www.giftingforcollege.com

By: Daria

Daria — Thu, 27 Dec 2007 02:54:15 +0000

You could keep them, but just reallocate the 529 to account for them. In other words, an allocation has a small percentage of bonds. So consider the fact that those are held outside the 529 and allocate within the 529 with stock funds only.

By: Michael

Michael — Thu, 27 Dec 2007 00:07:38 +0000

Sorry to hear that you can’t purchase a Roth IRA until the kids start earning money. BUT…
I still think saving bonds are an unfortunate gift. I was recently given some savings bonds that my father had bought for me in 1975. $300 worth, but I cashed them in for just over $900. Had that same $300 been in an S&P index fund (had such things been available then), it would have been worth over $5000.

By: Johanna

Johanna — Wed, 26 Dec 2007 21:14:51 +0000

My parents only recently turned my collection of savings bonds over to me. (I’m 30 years old – I was fortunate not to have needed the money for college, or for anything specific since then.) There’s more than $3000 worth, and while I can remember receiving some of them ($500 I won in a math contest in eighth grade), I’ll be damned if I can remember where most of them came from. I know my relatives gave me some of them when I was a kid, but since they weren’t something I could use or play with right away, they didn’t make much of an impression on me.

My advice: If you decide to hang onto the bonds, stick a note on each one listing who gave it and why. Better yet, have the giver write a short note to go with the bond, and hang onto both of them. That way, when it comes time for your children to use the money, they can reflect on all the caring people who have been generous with them over the years.

By: Macinac

Macinac — Wed, 26 Dec 2007 17:19:12 +0000

I believe it is the parent’s responsibility to make the best choice. If, for example, someone gave your nine year old a shotgun, you might decide to lock it away for a while. If someone gave your boy a girl’s bike, you might want to exchange it for a boy’s bike.

By: elizabeth

elizabeth — Wed, 26 Dec 2007 16:20:49 +0000

My husband and I gave my brother a savings bond this year. I know he has some from my grandparents. He is in high school, doesn’t have a 529 and has almost no savings. Everytime we give him any money, he buys stuff. We asked my parents to put it with his other savings bonds, but we also cosigned my husband so that no one else gets the bright idea to cash it in. They all need money, and we don’t want it taken. We will help him cash it out in 3 years (long before it matures) to help with college. At least then he will have something. Our only other option is to invest extra in our own portfolio and give him a large check at graduation. Which is likely part of what will happen in the future. I will add up the gifts (we are matching his savings bonds, but not telling him) and then take our average interest over the 3 years and add that to the amount. It will only be a couple hundred dollars, but I know he will need it to get started.

By: Robin

Robin — Wed, 26 Dec 2007 06:37:28 +0000

I heard Dave Ramsey talk about this. His grandmother gave his kids savings bonds every year, with the intent of them being used for college. He immediately cashed them and put them in their 529’s. When she asks how they’re doing, he tells her they’re doing great…

As an almost-graduated college student, I would much rather have had a 529 than a few savings bonds. Yeah, they were nice, but when I think about how much more money they would have been if they had been in a 529, it makes me sick. At least the older ones… the risk is very very low if you’re in the market for at least 5 years and you’re in mutual funds.

By: Ryan S.

Ryan S. — Tue, 25 Dec 2007 17:04:01 +0000

What type of bond is it? IIRC, I series bonds have some educational advantages, but I can’t remember what they are at the moment (that could make a nice blog post later :)
-
Ryan
http://uncommon-cents.net/

By: Heidi

Heidi — Tue, 25 Dec 2007 16:57:17 +0000

I would leave the bonds alone, unless the giver expressed a desire that the money should go into your children’s 529s. By cashing them in you are saying to the giver that savings bonds are a bad investment and that you are more financially sophisticated than they. Even if you believe exactly that – the social implications that you laid out above is reason enough to let them be.

Besides, savings bonds proceeds can be used for anything. What if your child decides to spend a year traveling in Europe or building homes in Africa before college? Cashing in those savings bonds can help make those kind of dreams happen.

By: wealthy_1

wealthy_1 — Tue, 25 Dec 2007 15:02:21 +0000

Perhaps the savings bonds were given just as a gift. Maybe the gift giver wasn’t thinking of investing in the children’s college education. Maybe they were just thinking the savings bonds would be money they would have in the future for whatever they wanted to use it for.

Next year if you would rather have a donation into the children’s college fund, you should graciously let people know that in advance.

By: Sandy

Sandy — Tue, 25 Dec 2007 14:31:28 +0000

My girls have gotten savings bonds every year for birthdays from the various relatives. They are still sitting in the envelopes they came in in our safe.
While It’s quite likely that they could get a better rate of return in a 529, that is not necessarily a given. Think back just a few years, when investors (including those with 529s) lost bigtime. I remember hearing a call in radio show, and a caller lost nearly all the money he had been saving for his kids education in the 529 plan..made me think! So, if you would like to “spread the risk” that that won’t happen to you, tuck those savings bonds away as an insurance policy against such an untimely crash in the market.
Plus, if they want to use the money for another reason (starting their own company, for example) it will be there for them…it is, after all, their money.
Once my oldest daughter’s savings account grew to $1000 of , while earned, she did not file a W2, and so was ineligible for the Roth IRA. We ended up opening up a CD instead. When she does have a job that she’ll pay taxes on, I’m thinking of having her split the amount she makes on saving for college and a Roth. But, again, she may want to save for something else, too…it will be HER money.

By: Bellen

Bellen — Tue, 25 Dec 2007 13:35:46 +0000

In trying to find a good way to give ‘money’ to our grandchildren I came across a site that stated a certain form had to be filed yearly with your taxes for any EE Bond or a big tax would have to be paid when it was redeemed. Do you know anything about this.

In speaking to our broker, they suggested a custodial account if we did not want to gift to a 529.
This is what we are going to do as the other grandparents are gifting to a 529. Gives the grandkids multiple sources of income when they can use it.

By: Michele

Michele — Tue, 25 Dec 2007 13:32:49 +0000

My kids both received bonds when they were born. They are now teenagers and I really never considered cashing them in until reading this. I would never ask the giver “why” they bought it… It’s a gift and I’ll give it to my kids later. (the amounts are small.. couple hundred bucks) I already know my son would put the $$ into junior CD or savings account. It will be a struggle to get my daughter to put any of it into savings.

By: JB

JB — Tue, 25 Dec 2007 05:55:42 +0000

Chris, the Vanguard STAR fund is the only Vanguard fund with a $1000 minimum investment. This could be a starting point.

I’d go for the 529 if you know it will be a better investment in the end.

By: Danielle

Danielle — Tue, 25 Dec 2007 05:27:47 +0000

Just a note on Roth IRA’s, You can’t open up a Roth IRA for your child until the child starts earning their own paycheck otherwise that would be a great idea. I plan on doing that for my children as soon as they start working. I would look @ the overall picture here in regards to diversity. If they have savings bonds then you could put more of their allocation in the 529 plan in more aggressive investments to balance out.

By: Chris Burgwald

Chris Burgwald — Tue, 25 Dec 2007 05:00:02 +0000

I’m in the same boat… our kids regularly receive savings bonds as gifts. I’d love to have a Roth IRA for each of them, but my problem is this: we have nowhere no the minimum required for a new account with my preferred company –Vanguard ($3000) — and I haven’t come across a solid alternative with an extremely low or no mimimum investment. Anyone have any thoughts?

Merry Christmas!

By: clint lawton

clint lawton — Tue, 25 Dec 2007 04:59:53 +0000

I think that bonds are a great way to invest. I was given one that was a lot of years old and it was now worth a lot of money. I don’t think that I would have kept it if it was in cash.

clint lawton
http://www.a-debt-free-life.com

By: vh

vh — Tue, 25 Dec 2007 00:59:59 +0000

Like Michael said! Start a Roth IRA for the kids. Then they’ll have something they can use for education or, if they prefer, for other purposes. My son used his for a down payment on his first house.

Merry Christmas, Trent, Mrs. Trent, and Little Trents! :-)