Can someone explain savings bonds?

[midnightmommy]

My grandfather gives a savings bond as a birthday presents to our son every year. The problem is that I know nothing about them. Do they mature over their value? When do they mature? Is there a better place we should put the money? Are we just better to sit on them until the economy gets better? I know nothing about investing, so this is all very new to me.

[milletpuff]

Depends on the savings bond. Usually, they have a face value (what you will get when you redeem them at maturity) and a "coupon rate" which is the interest they pay annually. There are also "zero coupon" bonds that you buy at a discount (say, $900) that don't pay interest while you have them, but you redeem them for face value ($1000) at maturity. Maturity varies a lot, from a year to 30 years.

Here's a good site that talks about the different sort of gov't bonds:

http://www.savingsbonds.gov/indiv/products/products.htm

Your bond should specify the maturity date, and the value that it will mature at.

They are considered a very low risk investment, with a correspondingly low return. They also *may* generate taxable income when they pay you interest. Right now it's great to have something safe, but you might want to consider a 529 plan instead or bonds, since the gains that you have on that won't be taxed if you use the funds for college expenses. If that money is intended to be a gift for "spending money", or if there is a reason that your kid(s) won't go to college, then keeping the bonds is fine. 529 money can be invested in similar products as bonds, you don't need to put it into stocks or the current unstable market.

Bonds can be sold once you get them, but the "price" you sell them for depends on interest rates.

I could basically go on and on about this, but I'll stop here If you have specific questions or want me to keep going, by all means ask!

[midnightmommy]

Thanks! I looked at them again and they are I bonds. They have a tool on the link you gave to figure out what they are worth, and they seem to be doing pretty good. He's only five, so maybe I'll worry about reinvestment when he's older. They can just sit for now. My grandfather gives these out to the younger kids to invest and when they hit their teens he gives them money to spend. I'm not sure why he does it like that he just does.

[Pumpkin_Pie]

I have a question about bonds as well. My mother bought a bunch of savings bonds for me when I was a child, but we are estranged now. I have always wondered what happened to them. I have no way of getting in contact with her (at least no way that I am willing to attempt). Is there any record of them anywhere other than with the person who holds them?

[midnightmommy]

From what I understand they should have your name and SS on them if they were for you. If you go to that link milletpuff posted you may be able to find out where to look them up.

[milletpuff]

OK, if they use the I bonds for education they will also be tax exempt.

And, if you are keeping them to maturity, you don't need to worry about that link to figure out what they are worth -- that's only if you wanted to sell them to someone else before they mature. If you are keeping it, you will get the face value plus the interest that has accrued when they mature. The only thing that would really affect the "value" is inflation, ie, you have a $100 bond now and when it matures, inflation has skyrocketed to 10% per year, so what you get when you cash it in doesn't buy as much. If you're holding on to them, you can calculate exactly how much you will get when you cash them in -- that's one of the nice things about bonds

[milletpuff]

Re: finding old bonds, there's a link on the treasury site here, to search with your SSN:

http://www.treasurydirect.gov/indiv/...easuryhunt.htm

You could also try your state's unclaimed property website, this will look for any unclaimed money that belongs to you. The main site is here:

http://www.unclaimed.org/

[Pumpkin_Pie]

Originally Posted by milletpuff

Re: finding old bonds, there's a link on the treasury site here, to search with your SSN:

http://www.treasurydirect.gov/indiv/...easuryhunt.htm

You could also try your state's unclaimed property website, this will look for any unclaimed money that belongs to you. The main site is here:

http://www.unclaimed.org/

Huh. They didn't have a record of my SSN. I wonder if my mother cashed them out before I turned 18? I left home when I was 16, so she very well may have done that without telling me. I remember her showing them to me as a little girl, so I know they existed once up upon a time. They were supposed to help me to go to college. I would love to use them now to help pay down some college debt!

[milletpuff]

Well, it looks like that site only has certain types of bonds ("This system only provides information on Series E bonds issued in 1974 and after") so if it were before that or a different type of bond it just may not be there. I found an article from Kiplingers magazine suggesting writing to them with all the info that you have:

http://www.kiplinger.com/columns/ask...2005/q0721.htm

Did you try the unclaimed property site too?

[KateKat]

Originally Posted by Pumpkin_Pie

Huh. They didn't have a record of my SSN. I wonder if my mother cashed them out before I turned 18? I left home when I was 16, so she very well may have done that without telling me. I remember her showing them to me as a little girl, so I know they existed once up upon a time. They were supposed to help me to go to college. I would love to use them now to help pay down some college debt!

They may have been under her social security number. The childhood bonds I received had my name, the giver's name, and the the giver's social security number. Either of us could have cashed them in.

[oneKnight]

I had 8 series I bonds, cashed them out last summer when we moved. Probably a good thing I did, seeing how things have turned. Anyway, I had 4 from 2000 to 2007 and 4 from 2001 to 2007, money I had saved myself. There was an article about series I bonds in the paper, so that's what I invested in. I was um, 14 in 2000 so I didn't have a lot of investing options at that time.

I put in $50 each x 4 and got about $350 out from them, twice (8 bonds total). They almost doubled in 7 years. I had to pay taxes on it.
They came up on a 1099 form from the bank, except the bank only listed ONE of the two dates that I cashed them out. I had my receipts from both days (4 bonds each time) so I called the main bank and asked them to fix it. They sent me an updated 1099 which still wasn't right by my records, but since it was then early April and it is the 1099 that you send in to the IRS (not my receipt) I went with their number and got my refund. It was kinda a PITA - probably my bank's fault.