The Ups and Downs of Giving Savings Bonds as Gifts

With Christmas approaching, my wife and I once again were faced with the difficulty of buying a cadre of Christmas gifts for my nieces and nephews. We often have particular trouble with one of my nephews, who is a middle child. He generally says that he doesn’t want anything for Christmas and, when forced, he asks his older sister what she wants for Christmas and repeats that.

After some abysmal gifts in the past few years (things he didn’t like, plus one thing he did that his parents absolutely refused to let him have), we are considering buying him a savings bond for his Christmas gift. In considering it, we are weighing the positives and negatives of such a gift.

Positives

It will help him out in the future. It’s not useful to him now in any way, but in a few years when he’s looking at college, it could buy a textbook or something. If he holds on to it until after college, it could help him furnish his home or something else. That’s better than a gift he’ll likely forget all about the day after Christmas.

It’s an investment. It will continue to grow in value over time, even if it doesn’t match that of a strong mutual fund or anything. He can just keep it somewhere safe and when he needs it, it will be worth more then than it is now.

It’s educational. If done well, a gift of a savings bond can be quite educational. They can teach the power of interest and also demonstrate how investments work in a simple way that children can grasp. I particularly like using the savings bond calculator to see how much a few savings bonds I received in my childhood are worth – and sort of worried that some of them are about to stop earning money, because it means I’m getting old.

It’s easy. It is quite easy to buy a gifted savings bond online – a few clicks and it’s done. I could also stop at my local bank branch and do the same thing if I so desired. This means no long searches for a particular item and no marching through malls looking for a gift – just click, click and it’s done.

Negatives

It’s easy. It’s an unexciting Christmas gift that is about as expected as can be; even Kiplinger’s pokes a bit of fun at the tradition. On Christmas morning, there are many more fun things to open than a savings bond, particularly for a child.

In short, we’re leaning towards buying the savings bond. Even though it’s boring, it reflects values that we care about now: careful money management and so forth.

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