Finding the perfect gift can be difficult, especially when you want something meaningful and long-lasting. Instead of giving cash or material items that lose value, why not give bonds as a gift? Bonds provide financial security, encourage saving, and often grow in value over time.
This guide will walk you through how to give bonds as a gift, the best types to choose, and the steps to transfer them successfully.
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Key Takeaways on How to Give Bonds as a Gift
- Giving bonds as a gift is a smart financial decision because they grow in value over time and encourage long-term savings.
- U.S. Savings Bonds, Premium Bonds, and corporate bonds are some of the best options for gifting.
- You can buy and transfer U.S. Savings Bonds online through TreasuryDirect, making the process simple and secure.
- Premium Bonds in the UK offer tax-free prize draws instead of interest, making them a unique and exciting gift.
- Corporate and municipal bonds provide higher returns, but they come with more risk and require a brokerage account.
- Setting up a TreasuryDirect account is necessary for both the giver and the recipient when gifting U.S. Savings Bonds.
- Gifted bonds may have tax implications, so understanding capital gains tax and redemption rules is important.
- Some bonds require a custodial account for minors, ensuring the investment is properly managed until they reach legal age.
- Bonds have different maturity periods, with some requiring several years before they can be redeemed without penalties.
- Gifting bonds is a unique and valuable alternative to cash, providing a lasting investment rather than a temporary gift.
Why Giving Bonds as a Gift is a Great Idea
Many people overlook bonds as a gift option, but they offer several advantages:
- They grow in value – Unlike cash, bonds earn interest and become more valuable over time.
- They encourage smart financial habits – Bonds teach recipients about saving and investing.
- They offer security – Government bonds, in particular, come with little to no risk.
- They are long-lasting – Unlike material gifts, bonds provide value for years.
If you want to give a unique and financially beneficial gift, bonds are an excellent choice.
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Types of Bonds You Can Gift
When deciding how to give bonds as a gift, choosing the right type is important. Here are some of the best options:
1. U.S. Savings Bonds
The U.S. Treasury offers two main types of savings bonds that are great for gifting:
- Series EE Bonds – These bonds double in value over 20 years and earn a fixed interest rate.
- Series I Bonds – These bonds adjust for inflation and provide a hedge against rising prices.
Both types are available electronically through TreasuryDirect. They are safe, government-backed investments ideal for long-term savings.
Related: Why Do Companies Issue Bonds
2. Premium Bonds (UK)
For those in the UK, Premium Bonds from National Savings & Investments (NS&I) make a great gift. Instead of earning interest, these bonds enter a monthly prize draw. Bondholders can win tax-free cash prizes while keeping their investment secure.
3. Corporate and Municipal Bonds
Corporations and municipalities issue these bonds to raise funds. While they offer higher returns than government bonds, they also come with more risk. To gift these, the recipient needs a brokerage account.
If you want to give bonds that offer both security and growth, government-backed savings bonds are the best choice.
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How to Give Bonds as a Gift
1. Create an Account on TreasuryDirect
In the U.S., all savings bond purchases happen through TreasuryDirect. You and the recipient must each have an account. Here’s how to set one up:
- Visit TreasuryDirect.gov and click “Open an Account.”
- Enter your personal details, including Social Security Number and banking information.
- After creating the account, log in to access the BuyDirect page.
2. Purchase the Bond
- Navigate to the BuyDirect section of TreasuryDirect.
- Choose the bond type (Series EE or Series I) and enter the purchase amount.
- Select “This is a gift” when prompted.
- Provide the recipient’s full name and Social Security Number.
Once you buy the bond, it stays in your account until you transfer it.
3. Deliver the Gift
- In your TreasuryDirect account, go to the “Gift Box” section.
- Select the bond you purchased as a gift.
- Enter the recipient’s TreasuryDirect account number and complete the transfer.
The bond now belongs to them, and they can redeem it when it matures.
How to Gift Premium Bonds in the UK
- Visit the NS&I website to buy Premium Bonds.
- If the recipient is under 16, only a parent or guardian can open the account.
- The minimum purchase amount is £25.
- The recipient is automatically entered into monthly prize draws.
Unlike savings bonds, Premium Bonds do not earn interest, but they offer a chance to win tax-free prizes.
Important Things to Consider Before Gifting Bonds
1. Tax Implications
Bonds come with tax rules that vary by country:
- In the U.S., gifted bonds do not trigger taxes, but the recipient may owe tax on the interest earned when they redeem the bond.
- In the UK, Premium Bond winnings are tax-free, making them an attractive gift option.
- Corporate and municipal bonds may come with capital gains tax if sold at a profit.
Understanding tax rules ensures the recipient gets the most value from the gift.
2. Age Restrictions
If gifting bonds to a child, you may need to set up a custodial account. In the U.S., a parent or guardian must link their TreasuryDirect account to the child’s.
3. Redemption Periods
Bonds typically have maturity periods:
- Series EE Bonds take 20 years to reach full value.
- Series I Bonds must be held for at least one year, and cashing out before five years results in a penalty.
- Corporate and municipal bonds have varying maturity dates depending on the issuer.
Checking the maturity rules helps the recipient understand when they can access their funds.
Related: What is the Difference between Debenture and Bonds
FAQ on How to Give Bonds as a Gift
1. How to give bonds as a gift to a child?
To give bonds to a child, you may need to set up a custodial account. In the U.S., parents or guardians can open a TreasuryDirect account and purchase Series EE or Series I Bonds in the child’s name. In the UK, Premium Bonds can be bought for children under 16 by a parent, guardian, or grandparent.
2. How to give bonds as a gift without a brokerage account?
You don’t always need a brokerage account to gift bonds. U.S. Savings Bonds can be purchased through TreasuryDirect, while UK Premium Bonds can be bought directly from NS&I. However, corporate and municipal bonds usually require a brokerage account.
3. How to give bonds as a gift for a special occasion?
Bonds make excellent gifts for birthdays, graduations, and weddings. To make the gift special, print a bond summary or certificate, frame it, and include a personal message about why you chose this investment for them.
4. How to give bonds as a gift to a friend or family member?
You can transfer U.S. Savings Bonds through TreasuryDirect by purchasing them as a gift and delivering them electronically to the recipient’s account. For corporate bonds, a direct brokerage transfer may be required.
5. How to give bonds as a gift that will grow in value?
To ensure the bond increases in value, choose:
- Series EE Bonds, which double in value over 20 years.
- Series I Bonds, which adjust for inflation.
- High-quality corporate bonds, which may offer higher interest rates but come with some risk.
6. How to give bonds as a gift without paying high fees?
Government-issued bonds like U.S. Savings Bonds and UK Premium Bonds have no purchasing fees. However, brokerage fees may apply for corporate or municipal bonds, so compare platforms before buying.
7. How to give bonds as a gift online?
In the U.S., you can buy and transfer bonds online through TreasuryDirect. In the UK, Premium Bonds can be purchased online through NS&I. Some investment platforms also allow you to buy and transfer corporate bonds digitally.
8. Can you transfer bonds to another person without paying tax?
Transferring bonds as a gift does not usually trigger taxes for the giver. However, the recipient may owe taxes on interest earned when they redeem the bond. Tax laws vary by country, so it’s best to check local regulations before making a transfer.
Conclusion
If you want to give a gift that lasts, bonds are an excellent choice. They grow in value, encourage smart financial habits, and provide security that few other gifts can match. Whether you’re buying U.S. Savings Bonds, Premium Bonds, or corporate bonds, the process is straightforward and rewarding.
Now that you know how to give bonds as a gift, consider making this thoughtful investment for a loved one. It’s a gift they’ll appreciate not just now, but for years to come.
The information provided in this article is for educational purposes only and should not be considered financial or investment advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the content. Investment decisions involving the subject matter should be made based on individual financial goals, risk tolerance, and professional consultation. Neither the author nor the publisher is responsible for any financial losses or decisions made based on this article. Always seek advice from a certified financial expert before investing.
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