Q about savings bonds

luvmykids wrote: My MIL buys them for the kids every year on their birthday but I'm curious to know if they're worth it or if a deposit to some kind of investment account would be better.

They're supposed to reach initial maturity (face value) in 17 years ....does that mean they'll be worth $50 plus the interest from the time of purchase until they're cashed? And that they're worthless until then? That means the kids will be 22, the whole point of this was for them to be able to use them towards college.

I'm just trying to figure out what they'll actually be worth when the time comes for the kids to use them.

boyohboyohboy replied: we have a few savings bonds, i am not sure if there are different kinds of bonds, but our mature in 10 yrs. and they were worth $500 so now in 10 yrs they are worth $1,000.
i think there are much better ways to invest the money and make a better increase..but i guess it depends on how good you are at that kind of stuff, and what you want to put it in. we opened a cd with the money once it matured and that makes more interest, and since its for the kids you can let it ride longer.

but since its given to us from the grandparents we let them decide how they want to do it.

luvmykids replied:
They're EE bonds, and say to buy them it's half of the face value. So if its a $50 bond, it cost $25...if they need to use it before it matures, it's only worth $25 then? Is that right?

Kaitlin'smom replied: form what I understand they are worth the original money put into until maturity then they double, and have the interest but it does not ammount to much. I have a couple I bought years ago and I am thinking of cashing them in and putting some into her college fund account.

moped replied: Personally I think savings bonds are a joke - I would put into soemthing more porfitable like a GIC or something - I know very little about it all but I know savings bonds aren't my favorite thing

Maddie&EthansMom replied: I was just thinking of this very thing today. I wanted to do something like this for my nieces and nephews for their upcoming birthdays. BUT, IMO a bond is worthless. Scotty had one that he cashed in after maturity and got $50 out of it. A savings acct would have brought much more than that.

Cash those puppies in and put the money somewhere else.

luvmykids replied:
That's what got me thinking, I saw a no minimum savings account earning 6%....the bonds are only 3.4%.

redchief replied: This site was where I went with those same questions.

I hope it was at least a little bit helpful.

Hillbilly Housewife replied: Bah. I don't buy them anymore. I used to. The kids probably have about 700$ in bonds from various sources (me and dh, grandparents, godparents...) from over the years... and I just don't care. They'll be cashed in when they're cashed in.

We do have RESPs for them though. Great thing is, if they're not used, they can be rolled into our rrsps. Although if we do that, we DO have to give back the 400$ per year per child that the government gives us if we max out our allowable contributions...which we do of course. Gives us a better tax return.

Not sure if that's different from in the US.

luvmykids replied:
Yes, it was a little bit helpful

The main question I can't seem to find an answer to is this: Do they earn interest on the $25 until they reach maturity, then earn interst on the $50?

Hillbilly Housewife replied: Monica, as far as I know, savings bonds can't be cashed before maturity anyways, so the question is kinda moot, no?

Or at least that's the impression I got when I first checked up on them...

luvmykids replied:
You can get your purchase price back after one year. After that, generally, you pay a penalty of three months of interest to cash them early.

These are, at the moment, the main source of their college fund which is why I'm trying to figure out how to get the most bang for the buck.

moped replied: Call your investment advisor - I am certain they will direct you properly.

RESP?

luvmykids replied:
That would be me

moped replied:
Your bank would have a financial planner or call the brokers office and get yourself one!!!!!

moped replied: See, with Jack, everytime his account gets to $2000.00 (I may change it to $1000.00) I dump it into whatever my financial planner suggests - just did it this week. It is usually a one year GIC and then in a year we may decide to put it elsewhere.

I could do an RESP and get government money but I hope that when the time comes we can pay for it and this money can be for a house or whatever when he is mature enough!!!!!!

luvmykids replied: I probably do need professional advice, I just hate talking about this kind of stuff.

What is a GIC?

moped replied: A pension plan funding vehicle in which an insurer accepts a single deposit from a plan sponsor for a specified period of time, such as five years, and holds the deposit at a specified rate of interest. At the end of the period, the deposited funds, including accumulated interest, are returned to the plan sponsor, who can reinvest the plan assets with the insurer or with another party. Also called a guaranteed income contract or a guaranteed interest contract.
www.1stinsured.com/g.htm - Definition in context

Cece00 replied: My MIL buys these, too. I think they are worthless, JMO. I would rather her give me the $50 and let me put it into savings & I will be putting all their college money into some other things pretty soon...I hate when she buys them. At least she is the only one, but IMO, what good are they? They pay SO little compared to a lot of other things.

TheOaf66 replied: The best thing you can do is pool that money up and put it into a cd that just keeps rolling over. Put the money into a 1yr cd and every year that she gives more money, add it to the CD. Much better interest rate then a savings bond and a bigger penalty if you touch it

lovemy2 replied: They aren't worthless until maturity but they aren't worth much more than what was paid for them- remember a $50 bond only costs $25....at maturity - they are worth the face value PLUS the interest they earned over the years - all depends on the interest rate at the time of purchase - HOWEVER - the worst part about them is when they are cashed in - you pay income tax on the interest (or the child does - being that they are in their name) USUALLY that isn't a big deal but it can be if there are enough bonds and enough interest - you could be paying federal tax on them.....

IMO - and I am by no means an expert - the best college savings programs out there right now are 529 plans - they are much like an IRA - the money grows tax free (see below - it is from a research site we use at work)

"There are two types of 529 plans--college savings plans and prepaid tuition plans. The federal income tax treatment of these plans is identical. Your contributions to college savings plans and prepaid tuition plans are tax deferred. This means that you don't pay income taxes on the plan's earnings each year.

Then, if you take out money and use it to pay for qualified education expenses, the earnings portion of your withdrawal is free from federal income tax. This presents a significant opportunity to help you accumulate funds for college.

Qualified education expenses include tuition, fees, and books for college and graduate school. Room-and-board expenses are also considered qualified if the beneficiary is attending college or graduate school on at least a half-time"

The money which is deposited to the plans is also reaps a State tax credit for the person who deposits it (check with your State about what it is) - trick is only the person who owns the plan (ex: I have a plan for both my kids - it is in my name but they are the beneficiaries of the plan for their college education) can deposit the money - so technically your in laws or whoever is buying the savings bonds should open the account and then deposit to it - it doesn't affect them financially as even though their name is on the account it isn't technically theirs - KWIM? It actually belongs to the beneficiary so - it doesn't affect their overall net worth -

I could go on for hours and pages about this as it is something I do for a living but anyway - go to this site

http://www.sec.gov/investor/pubs/intro529.htm for some general information on them and then check your state's tax department website for more state specific information - they are available in all 50 states -

It is a MUCH better option than Savings Bonds - not that they are worthless but they don't provide the tax savings and specific goal like college savings etc. that 529s do - the money in a 529 can be invested in several ways within the plan.

I am trying DESPERATELY to get my inlaws to stop buying savings bonds and open one of these for each kid - but so far their back woods minds can't wrap around it

If you want more info, pm me - sorry this got so long but I actually do know alot about this

mysweetpeasWil&Wes replied: Good thread. We just got our first SB from my aunt for Wesley's birthday. I don't know anything about them, but DH looked into it and was like "why didn't she just send us the money so we can put it into his account?". It really doesn't amount to much by the time he can take it out. They seem pretty pointless IMO.

Maddie&EthansMom replied:
ITA....we have the 529 for our kids. We actually have a financial advisor and he gave us several options back when we were looking. This seemed like the best deal to us.

redchief replied:
The answer to the question is... It depends. And I don't understand upon what it depends either.

That's why I posted the site... Finally I went to the bank and the manager looked it up in a EE book and told me under what rules my bonds were written.

luvmykids replied:


I'm going to just take mine to the bank too, thanks for your help!

gr33n3y3z replied: there is a place on line you can punch in the numbers and series and it will tell you how much they are worth

I think they are a waste of money my kids never made any money on them just the face value

lovemy2 replied:
Yes - go to the US Treasury website - there is a savings bond calculator there - put in the serial #s and you can get all kinds of info - interest, maturity date, current value, etc....

They aren't necessarily a waste of money if you keep them to maturity BUT they are not a good vehicle for college savings....

gr33n3y3z replied:
oh they kept them years after maturity and they still didnt make crap on them
they would have been much better in another type of account with cash.