savings

The lowdown on electronic US savings bonds

Don TaylorDear Dr. Don,
What U.S. savings bonds are available at the traditional purchase ratio and yield? Now that paper bonds have become digital, I can't seem to find any information on buying them at half face value anymore. I'm beginning to think the change in the Series EE purchase system is because the government's finances are stretched, not just because they're trying to save money on paper. Can you help me?

Thank you,
-- Rebecca Redouble

Dear Rebecca,

I'm guessing you want your U.S. savings bond gifts to have bigger impact than what you actually spend on them. When you give someone a $50 savings bond, that person is probably not thinking that it only cost you $25. With the new electronic or digital bonds, the gift will reflect the initial investment. In my example, that's $25. The interest earnings will compound on the initial investment, just as it would with the paper bonds. The main difference is that there's no physical piece of paper with a face value shown twice the initial investment.

By law, the electronic version of the Series EE U.S. savings bond purchased as a gift will still double in value in 20 years. That's a yield of about 3.5 percent. That's just slightly lower than the yield on the 30-year Treasury bond, as of this writing.

The gift recipient needs to know that the bond should not be redeemed before a period of 20 years has passed. If he does jump the gun, he'll get only a fixed interest rate determined at purchase, currently just 0.2 percent.

On its website, Treasury Direct offers different gift certificates. Depending on the occasion, you can print one out and give it to the recipient. I suppose you could type in twice the purchase price and later explain the difference when you deliver the electronic bond to the recipient. That's only if you want to go through the trouble.

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