Giving Digital Savings Bonds as Gifts
Yesterday I described how a SmartyPig gift card can be a useful alternative to a savings bonds for gifts now that paper savings bonds are no longer an option. Even though you can no longer give a paper savings bond as a gift, you can give digital savings bonds as a gift. For those who purchased old paper savings bonds as gifts, it might take some time to get used to the new way of purchasing digital savings bonds. Also, you'll have to get used to the idea of there being no physical paper savings bond. TreasuryDirect has provided a way that you can print a gift certificate so you can have something to physically give. These changes may not make a savings bond gift quite as nice as before. Nevertheless, the essential features remain the same.
How to Buy a Digital Gift Savings Bond
TreasuryDirect has set up a special page with instructions on how to buy a gift savings bond. In short, you'll need a TreasuryDirect account. Also, you'll need the recipient's name and social security number. The recipient of a gift savings bond must have a TreasuryDirect account before you can deliver the bond to him or her. However, this can be done later. Until the recipient sets up an account, you can hold the bond in the Gift Box area of your TreasuryDirect account.
Here's the TreasuryDirect's step-by-step instructions for buying a gift savings bond. As you can see, it can take some time especially if you don't have a TreasuryDirect account. They also have a help video which I pasted below:
Once you have purchased a gift savings bond, you can print a gift certificate to give to the recipient in advance of getting the bond. This TreasuryDirect page provides printable gift certificates for many occasions including an anniversary, birthday, wedding, graduation or holiday.
Pros and Cons of the Digital Gift Savings Bonds
The main issue many will have with digital savings bonds is the process of going through TreasuryDirect. For those who are not web savvy, this may be a significant issue.
Another issue is the lack of a paper savings bond. A gift certificate printout just doesn't provide the same feel.
There's another downside to digital savings bonds for gift givers, but it's just a minor downside. With the old paper Series EE Savings Bonds, it appeared like the value of the bond was twice as much as it actually was. The reason is that EE bonds were sold at half face value. For example, a $100 EE Bond could be purchased for only $50. So it appeared that the gift has a present value of $100 rather than $50. This "illusion" can no longer be done. Digital bonds purchased via TreasuryDirect are sold at face value; i.e., you pay $50 for a $50 bond. This might be considered a plus for the recipient since he or she will know the true present value of the gift.
Even though the EE bonds are now sold at face value, they are still guaranteed to double in value. At a minimum, the U.S. Treasury guarantees that an EE Bond's value will double after 20 years, its original maturity.
One advantage with digital savings bonds is that it eliminates the problem of lost paper savings bonds. Savings bonds received as gifts are probably often lost or forgotten. In fact, in 2005 it was estimated that $12.5 billion in savings bonds were no longer earning interest. There are ways to recover lost savings bonds, but many people don't bother especially when the savings bond gifts were small. With the new digital savings bonds, the recipient doesn't have to worry about losing the paper bond. However, they will now have to maintain their TreasuryDirect account. If they forget their account number and/or password, they won't be able to access the money. TreasuryDirect has procedures to deal with forgotten account numbers, but that may be too much hassle for some people.
Another issue to consider about giving savings bonds as gifts is the value of the savings bond deal. Are there better investment deals? Both the I Bond and the EE Bond have features that make them a good deal compared to other 100% safe investment alternatives. That's especially the case in today's awful interest rate environment. I have more details in my last savings bond post.
Have you purchased the old paper savings bonds as gifts? Have you or do you plan to purchase the new digital savings bonds as gifts?