Since 1935, grandparents have been giving their children's children U.S. savings bonds for birthdays, holidays and graduations. An investment that also provides valuable lessons about saving money, a paper savings bond can be placed in a box with a bow, or at least tucked inside an envelope.
As of Jan. 1, this gift-giving tradition won't be the same because, like so many other things in our financial lives, U.S. savings bonds are going paperless.
Children didn't necessarily appreciate the bonds when they opened them -- "It was one of those things, like getting underwear," my friend Lorie recalls -- but they usually did later.
As Pocket Changed blogger Caleb Wojcik wrote:
Every Christmas my grandparents gave me savings bonds. "Can I spend it?" I would ask. "Not yet," my mom would say, "but someday." At the time I was confused, but now I realize how thoughtful a gift it was.
In 2012, the bonds will no longer be available for purchase at banks and other financial institutions and can be bought in electronic form only at TreasuryDirect.gov.
Value of savings bonds
"U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government," says the U.S. Securities and Exchange Commission website.
One reason for their popularity as gifts is that minors are allowed to hold U.S. savings bonds in their own names. With electronic savings bonds, parents will have to set up accounts for anyone under 18, but minors can own savings bonds via linked accounts.
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Going paperless will save money
Part of an "all-electronic initiative," the switch to paperless savings bonds is projected to save the department as much as $120 million over five years by eliminating printing, mailing, storage and fees paid to financial institutions for processing applications.
If you want to convert your Series E, EE or I paper bonds to electronic securities, you can do so via the SmartExchange program, which walks you through the process and spells out the advantages of going digital. As you do with other financial accounts, you'll have 24-hour access to your savings bonds.
Another advantage of electronic savings bonds: You can purchase them in any value, from $25 to $5,000, in penny increments. Paper bonds were available only in specific denominations. So you can purchase a $50.11 bond for your grandson's 11th birthday, for example.
Will paper savings bonds be missed? The move to digital penalizes people who aren't computer-savvy, Allen Schwartz told the St. Petersburg Times, such as his 88-year-old mother-in-law. "She's disabled, legally blind, has no computer and can't do things online," he said.
MainStreet's Matt Brownell argued that children can get a better rate of return -- and learn more about investing -- if you give them an old-fashioned stock certificate.
Series I bonds purchased with tax refunds will still be available in paper form in 2012, according to the Treasury Department, but that may change in the future as well, UPI.com reported.
If you received paper savings bonds as a child, and would like to share that experience with your children or grandchildren, it's not too late to buy them for one last generation's Christmas stockings.
Who knows, years from now your gift may have added value in being one of the last paper savings bonds issued.
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