Treasury wants you to choose the onesie over the savings bond.
My wife and I love to attend baptisms and any kind of new baby-party. There is something about seeing someone so young and thinking about their future. That is why we favor U.S. savings bonds as a gift. A 3-month old generally doesn’t need toys or clothes, so the gift of savings seems ideal. They can use it for college, starting out in their first apartment, or even something huge like buying a house or starting a business. This last weekend we were pretty disappointed in our attempt to purchase a bond for a baptism. We couldn’t do it! Our bank let us know that the paper bond program is no longer going on. They gave us a flier for the alternative, using the Treasury Direct program.
To be clear, eliminating the paper option for savings bonds is bad for asset building and for a lot of families.
First, the alternative to paper bonds is not a good solution. The Treasury Direct website is difficult to navigate, it took my wife and I an entire day to figure out that we couldn’t purchase a bond until we received a pin number. For the millions of families who are not Internet savvy or want to purchase a bond immediately, Treasury Direct is a nightmare. It is not user friendly and it is really made for large-scale investors, not individual consumers.
Secondly, low- and moderate-income families will really bear the brunt of this move. They are traditional bond holders. In fact, 35% of bond holders – some 3.5 million families—are in the lower 60% of household incomes. Lower-income families are also less likely to be consistently banked, a requirement of the Treasury Direct platform. These are the families that we want to establish a pattern and experience of saving.
Third, savings bonds are an ideal mechanism for all savers. They are accessible with a low buy-in rate ($25), there are no fees and the interest rate is competitive, and they have an important history in this country. They are safe and still relatively “liquid” in that you can cash them at any time. Also, as I mentioned earlier, bonds are a rare savings product because they are giftable.
Fourth, just in the last few years, the savings bond program has reenergized savers. The tax-time savings bond program has been incredibly successful. Thousands of people are buying bonds to save at tax time. This program, thank goodness, has been preserved and is not slated for cuts. The program’s success shows us at least two things: 1) families are looking for safe, easy, and quick ways to save and 2) early survey results show that one-third of lower income families that purchase savings bond move toward future savings habits.
It isn’t too late to postpone the end of the paper bond program. Even phasing it out until a viable replacement option is found is far better than abruptly ending it. I am anxiously awaiting my pin number to purchase a savings bond but if the website continues to fall short, off to the Baby Gap we go.