How to Buy a Savings Bond as a Gift

Savings bonds are a safe Treasury investment instrument that must be held for a certain number of years before gaining full value. While not a shiny, glamorous gift, savings bonds make a practical gift for a child or loved one. While your child probably won't enjoy opening a bond as much as she would enjoy opening a new toy, a bond is a gift that keeps on giving. Children can watch their savings bonds grow in value as they grow up. The money will be helpful in the future and can teach children about growing interest.

Instructions

Difficulty: Easy

Things You’ll Need:

• Payment for the bonds
• Gift certificate to include in a greeting card
• Social Security number (yours or the recipient's) or Federal Tax ID number

Buying Bonds As Gifts

1. Visit your local bank, credit union, or other financial institution where bonds are sold and fill out the application. A bank employee will be able to help you with this. Once you apply for a bond your financial institution exchanges the application for a bond with a Federal Reserve Bank, and the bond is mailed to you or your recipient. (The issue date will be the application date so no interest is lost).
2. Buy electronic gift bonds online directly from the U.S. Treasury Department (see Resources below).
3. File for taxes. If your child receives a savings bond as a gift, you should file a 1040 form each year. Then there is no tax due when he or she redeems the bond (if the child is under 18), unless the amount earned exceeds a preset limit.
4. Purchase bonds at their face value or at a discount. When you buy paper bonds, they are sold at half the amount of face value. For example, a $50 bond costs $25. When you buy electronic bonds, they are sold at face value and will be worth that face value when they are redeemed (see Resources below).
5. Have a gift certificate in the meantime, to include in a greeting card for your gift recipient. Some banks offer these. TreasuryDirect offers customizable gift certificates for people who buy bonds online (see Resources below). You can also make one yourself or just write a note to the recipient that your gift is a savings bond.

Tips & Warnings

• Savings bonds cannot be transferred. They are only payable to the person who owns them (or a beneficiary in the event of an owner's death). You cannot reassign bonds or use them as collateral for a loan. However, you can give a bond to another person by having it reissued in the new person's name. You may be required to pay taxes if you do this.