How to Buy a Savings Bond for a Child

Savings bonds offer a secure investment, representing a loan to the U.S. government that repays principal with interest. They are a popular tool for long-term savings or gifts, especially for children, providing a foundational financial asset.

Choosing the Right Savings Bond

When considering a savings bond for a child, two primary types are available: Series EE bonds and Series I bonds. Series EE bonds provide a fixed interest rate and are guaranteed to double in value after 20 years. They accrue interest monthly, compounded semiannually, and continue to earn interest for up to 30 years.

Series I bonds feature a composite interest rate combining a fixed rate and a variable inflation rate. This inflation component adjusts every six months based on changes in the Consumer Price Index, offering protection against rising living costs. Both bond types can be purchased electronically for amounts ranging from $25 up to $10,000 per calendar year.

Both bond types require a minimum holding period of one year before they can be redeemed. If redeemed within the first five years, the holder forfeits the last three months of interest. For a child’s long-term savings, Series EE bonds offer predictable growth with their doubling guarantee, while Series I bonds provide inflation protection, making them suitable choices based on economic outlook and risk profile.

Information Required for Purchase

Before purchasing a savings bond through TreasuryDirect, gather all necessary information for both the purchaser and the child. For the purchaser, this includes your full legal name, current address, and Social Security Number or Taxpayer Identification Number. You will also need your bank account and routing numbers to fund the purchase, as electronic bonds are bought directly from a linked bank account.

For the child, their full legal name, address, and Social Security Number or Taxpayer Identification Number are required. Having this information readily available streamlines the purchase process on the TreasuryDirect website. Accuracy in these details is paramount, as errors can cause delays or complications in bond issuance and future redemption.

The Purchase Process via TreasuryDirect

Purchasing a savings bond for a child occurs through the TreasuryDirect website, the official platform for buying U.S. Treasury securities. The first step involves the purchaser creating their own TreasuryDirect account. Once your account is established and linked to your bank account, you can set up a “Minor Linked Account” for the child.

To establish the Minor Linked Account, navigate to the “ManageDirect” tab within your TreasuryDirect account and select “Establish a Minor Linked Account.” Input the child’s required information, such as their name, Social Security Number, and date of birth. You can also name this linked account and confirm or update the bank information from your primary account.

After the Minor Linked Account is set up, you can purchase the desired savings bonds. Select the bond series (EE or I) and the purchase amount, which can be as little as $25. The system will prompt you to select the funding source. After reviewing and confirming the purchase details, the transaction is completed, and the bond will be held electronically within the child’s Minor Linked Account.

Understanding Ownership and Gifting

Consider the ownership registration when buying a savings bond for a child, as it dictates who controls the bond and its proceeds. One common registration option is “sole ownership,” where the bond is registered directly in the child’s name. In this scenario, while a parent or guardian manages the bond through a Minor Linked Account until the child turns 18, the bond is legally considered an irrevocable gift to the child.

Another option is “owner with beneficiary,” where one individual is the primary owner and another is named as the payable-on-death beneficiary. Upon the primary owner’s death, the bond automatically transfers to the beneficiary without going through probate. A third option is “co-ownership,” where two individuals jointly own the bond with equal rights. Either co-owner can redeem the bond independently.

For gifting a bond, both the giver and recipient must have TreasuryDirect accounts. Once purchased, the bond is held in the giver’s “Gift Box” for five business days. After this period, the giver can deliver the bond electronically to the recipient’s TreasuryDirect account by entering the recipient’s account number. The recipient receives an email notification of the gift, and the bond appears in their account.