Making a decision to buy savings bonds for children is a task that requires attention to several details surrounding the purchase. One key consideration focuses on the reasons behind the purchase, the maturity dates associated with different series of bonds, and even the desired returns for those bond issues. By taking the time to understand the goals for the bonds, it is possible to purchase the right savings bonds for children and be well on the way to achieving those goals.
One of the first issues to consider when choosing savings bonds for children is to identify why the purchase is being made in the first place. It is not unusual for parents and others to purchase those bonds as a means of helping to deal with college expenses, either during the college years or as a source of revenue to help retire student loans after graduation. When this is true, focusing on bond series that provide tax breaks when the proceeds will be used to settle qualified educational costs is a good idea. At other times, the goal may be to create a nest egg that the child can utilize for buying a home after he or she is a certain age. Understanding the reasons for the purchase will make it easier to settle on the bonds that will be right for the particular situation.
Another issue to consider when buying savings bonds for children is the duration of the bond issue. Ideally, the bond should carry a duration that prohibits the child from being able to cash the bond prior to a certain age. At the same time, the maturity date should coincide with the right time in life to help with the intended purpose behind the bond purchase. Banks and other financial institutions that offer savings bonds for sale can help buyers identify bonds with an viable maturity date and provide data on any tax breaks that may apply with each type of bond purchase.
Choosing between paper or electronic bonds is another matter that must be addressed when buying savings bonds for children. Paper bonds can be purchased at half the face value, gradually maturing to reach that full value. By contrast, electronic bonds are sold at face value and accrue interest at the stated rate. While both approaches generate returns over the years, paper bonds may be lost or misplaced over the years and be difficult to replace.
