Are savings bonds a good investment for grandchildren?
Savings bonds typically earn a lower rate of return than higher-risk investments such as stocks, but they're generally a safe investment. Minors can hold savings bonds in their own names, making them a tried-and-true way for grandparents to introduce grandkids to the concept of investing.
The everyday option: a children's saving account
You can remind your grandchild that if they save money rather than spend it all in one go, they will have a lump sum to buy bigger items. Also point out when they receive interest their money is making money.
Gifting paper I savings bonds
With your tax refund, you can buy savings bonds for anyone (yourself, your child, or as a gift to anyone).
- Custodial accounts (UGMA/UTMA) ...
- 529 college savings plans. ...
- Series I or EE bonds. ...
- Certificates of deposit (CDs) ...
- Youth savings accounts. ...
- Develop a savings plan. ...
- Make regular contributions. ...
- Incremental increases.
Savings Bonds. Savings bonds make excellent financial gifts because they can grow steadily by earning interest. Treasury securities are types of debt instruments that include Treasury bills, notes, bonds, Treasury inflation-protected securities (TIPS), and savings bonds.
Maternal grandparents and maternal grandmothers (MGMs) in particular consistently show the highest levels of investment (e.g. time, care and resources) in their grandchildren.
You can open a 529 plan in the name of a grandchild (the beneficiary) or contribute to a plan your child owns on behalf of your grandchild. In 2023, you and your spouse can each put $17,000 into your grandchild's 529 plan without triggering gift taxes.
| Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
|---|---|---|
| $50 Bond | $100 | $207.36 |
| $100 Bond | $200 | $414.72 |
| $500 Bond | $400 | $1,036.80 |
| $1,000 Bond | $800 | $2,073.60 |
You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent. Only certain qualified higher education costs are covered, including: Tuition.
Bonds are sold at face value, for example, a $50 bond costs $50. Bonds accrue interest, and your gains are compounded, meaning that interest is earned on interest.
How much money can a grandparent give a grandchild tax free?
Annual gifting exclusion limits
This is known as the annual exclusion. For 2023, the annual limit per recipient is $17,000 and for 2024 it's $18,000. In other words, you can give up to annual limit per grandchild without worrying about tax implications or filing a gift tax return.
If it still doesn't feel right to hand over a large sum at the moment, you could consider a trust, and have a say in how and when the money is used. With changing family dynamics, a trust can provide further options for flexibility and control when making large cash gifts.
From a practical perspective, the grandchildren's parents are often in the best position to know how to use the money for the benefit of their children and can spend or invest it appropriately on their behalf.
If you're saving for education or retirement, Roth IRA and 529 accounts are popular options to explore. And they may offer better tax deductions or a higher Annual Percentage Yield (APY) than a savings bond. Inspired to start saving? Explore these 9 simple ways to save.
Such is the case for savings bonds. Because of their considerable low risk and the fact that they are backed by the full faith and credit of the U.S. government, Series I and Series EE bonds do not offer the possibility of returns as substantial as higher-risk investments like stocks, options and futures can.
Bottom line. I bonds, with their inflation-adjusted return, safeguard the investor's purchasing power during periods of high inflation. On the other hand, EE Bonds offer predictable returns with a fixed-interest rate and a guaranteed doubling of value if held for 20 years.
The golden rule for grandparents is to love unconditionally, offering unwavering support and affection to their grandchildren.
The paternal grandfather has two potentially uncertain kinship links and is therefore expected to invest the least, which is in accordance with most empirical findings. However, explanations based on paternity uncertainty ignore the sex of the grandchild.
Review how much you've spent on them during the year.
According to an AARP survey, grandparents spend an average of $2,562 on their grandkids each year. You might consider how much you've already spent on your grandkids for birthdays or holidays when you figure up your Christmas budget.
A grandchild may be a qualifying child if you meet eligibility rules. The 2021 Child Tax Credit is up to $3,600 for each qualifying child. Eligible families can claim the credit through April 15, 2025, by filing a federal tax return—even if they don't normally file and have little or no income.
How much should a grandmother give for a wedding gift?
There is no set amount or expectation for how much to give. However, some common guidelines suggest that a typical range for a wedding gift is between $100 to $500. Of course, this is just a suggestion, and it's entirely up to the giver to decide how much they would like to contribute as a gift.
As a rule of thumb, you can give $50-$500 as a single guest, depending on your relationship to the couple. For a casual guest who might not be making a ton of money, $75 should be sufficient.
That rate remains the same for at least the first 20 years. It may change after that for the last 10 of its 30 years. We guarantee that the value of your new EE bond at 20 years will be double what you paid for it. (If you have an EE bond from before May 2005, it may be earning interest at a variable rate.
They're available to be cashed in after a single year, though there's a penalty for cashing them in within the first five years. Otherwise, you can keep savings bonds until they fully mature, which is generally 30 years.
But don't be fooled into thinking that the oldest ones are the most precious. A $100 bond issued in January 1943, which stopped earning interest in 1983, is worth just $399.80. But a $100 bond issued in January 1965, which earned a more generous rate until 2005, is worth a cool $936.44.
