Series EE Savings Bonds for Children

Baby Frugalista is a lucky little lady. Not only is she getting a $5 weekly “allowance” from one of her grandpas, she’s also the recipient of two $100 US Series EE savings bonds. Hopefully, there will be more to come, because heaven knows how much a four-year degree will cost in 18 years…

Bonds are a pretty safe way of investing your money in the long-term. Paper-issued US Series EE savings bonds are purchased for half the face value — for example, a $100 bond costs $50 upfront, while electronic bonds bought through TreasuryDirect.gov cost face value. The bond then earns interest at a fixed rate based on when it was purchased (this Treasury Direct link breaks it down — notice the drastic drop after the April 2008 period was up!). Baby Frugalista’s current bonds are at 0.60% and 1.10% interest. After 20 years, the paper bonds are guaranteed to be worth the $100 face value, and will continue to accrue interest for another 10 years. If bonds are purchased electronically, they’re worth the full face value sooner, when they can be redeemed.

What’s nice is that Series EE savings bonds are exempt from state and local taxes, while the federal taxes are deferred until the bond is redeemed or stops earning interest after 30 years. Another perk is that the tax on the interest might be reduced or excluded if the bonds are used to pay for higher education. I hope that will still be the case when this little girl heads to college — not that I want to think that far ahead!

Baby Frugalista will be four months old on Thursday, and its amazing to see how far she’s come. She appears to be hitting all of her developmental milestones, and really, really wants to sit up! I catch her pulling her head and shoulders up when she’s seated in a reclining position, such as on the bouncy seat. She discovered her hands weeks ago, and now raises her legs straight up into the air to gaze at her feet. She rolled over from tummy to back twice, and is regaling up with her ‘baby chatter’ multiple times a day. It’s really wonderful and amazing to see her progress!

Happy Retirement!

Wanted to wish my dad (an avid Penny Frugalista reader) a happy retirement! You’ve definitely earned it!