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Why would anyone buy savings bonds?
My 6 year old son keeps getting these savings bonds as gifts. Why does anyone think this is a good gift to give? His EE bonds all pay a 30 year fixed rate of between .7% and 1.2%. How on earth can someone think giving a 30 year bond paying a fixed rate of .7% is a smart move? Just give him the cash and I could put it in a lousy CD and get triple that. He also has a few I bonds that are paying better than the EE bonds but because they are tied to inflation the rate for the past 6 months was actually ZERO percent. Yes, my son was given a bond that had a current rate of zero.
The other thing that kills me is how the taxes work. Right now the taxes on these bonds are deferred until the bond matures. That sucks because as a child he'd pay no taxes on his interest but will instead be hit with all the taxes at once when he's 35 and in a real tax bracket.
These things suck all the way around. The only reason for a gift like this that I can think of is that the person buying them has no clue what they pay or how they work. I cashed them all in early and put them in a mutual fund inside a college account. I think over the next 13 years the market can average better than .7%.
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