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December 23, 2004
Savings Bonds: A Great Last Minute Gift for Kids
Still looking for a present for a child? For many families, Christmas is a time of great excess, when the last thing children need is yet another toy. Plus, it can be frustrating to carefully choose a child's gift only to see it quickly opened, glanced at, and tossed aside in the holiday chaos.
Why not consider a savings bond instead of a toy? It may sound old-fashioned, but you can still buy a $50 Series EE bond for $25. It will make both the child and the parents happy.
Right now the rate on a Series EE bond is 3.25%, which is no great shakes. But what is pretty great about these bonds is that rates adjust every six months to equal 90% of the five-year Treasury bill. That means that if rates go up, the bonds will appreciate more. They are free from state and local taxes and keep earning interest for 30 years (so they can become much more valuable than the face value if held a long time).
You could also buy an I-bond, which comes with inflation protection. The smallest denomination is $50 and they aren't sold for half their face value, which make them a little less handy at Christmas time. But they currently pay 3.67% -- not too shabby. That rate will increase with inflation over the next 30 years.
If you want to find out more, the Bureau of the Public Debt's Savings Bond site has a wealth of information. You can even buy bonds online, commission-free from the government at Treasury Direct .
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