Savings Bonds: The Season's "Should-Have" Stocking Stuffer

By Anne Kim

(Image of $100 Series EE savings bond via the Department of Justice website)

For many Americans, the winter holidays are an orgy of shopping and consumption. On Black Friday, a record 247 million Americans—or more than half the country—went to the mall. According to the National Retail Federation, the average shopper spent $423 Thanksgiving weekend, for total sales of $59.1 billion.

Still shopping for holiday stocking stuffers? Forget Pokemon cards—why not a savings bond?  

It might be time for a holiday counter-tradition: “Savings Bond Sunday.” That’s when every parent in America gives one $25 U.S. savings bond as a pre-holiday gift to each child. Unlike a check, it doesn’t beg to be spent or require a trip to the bank. And while it might not be as glamorous as a Wii U, it’s far less expensive and infinitely more valuable in the long run.

In addition to bolstering a budding nest egg, the annual gift of a savings bond can help instill in kids the habit and expectation of saving—something that Americans very badly need to do.

In September 2012, the personal saving rate was just 3.3 percent. According to CFED, a stunning 43 percent of Americans don’t have enough cash socked away to make it three months at the federal poverty level. And even as Americans are paying down their credit cards, the average American still owed more than $5,500 on their credit cards as of July 2012, according to consumer site CreditKarma.com. This is on top of other typical burdens on Americans’ household balance sheets: student loans, car payments, and mortgages.

So what better way to help reverse this tide of consumption and debt than by giving savings bonds, the ultimate national symbol of thrift?

Among their virtues, savings bonds are safe, they’re available for just $25, they come with no fees, and they offer interest rates that are relatively competitive compared to bank savings accounts. Moreover, the “Series I Bond” is reasonably liquid. It’s bought and redeemed at face value (you pay $25 for a $25 bond), and can be cashed in with minimal penalties in case of an emergency.

Because of these benefits, savings bonds have in fact proved an ideal savings tool for some Americans, especially “starter” savers with less money to put away or who lack access to a traditional savings account.

For example, the Boston-based Doorways to Dreams (D2D) Fund, a non-profit founded by former Harvard Business School professor Peter Tufano, has long championed savings bonds as a tool for helping low-and moderate-income savers. 

In particular, the organization is spearheading an initiative encouraging lower-income taxpayers to save at tax time by buying savings bonds with some of their refunds. In the 2012 tax year, more than 35,000 people participated in the “tax time savings bond” campaign, saving an average of $579 and a total of $20.3 million. In the three years since the program’s launch, the amount saved and the number of community organizations participating has grown exponentially.

Moreover, it’s only been fairly recently that “gifting” bonds has faded as a tradition. After their introduction in 1935 to help finance World War II, Uncle Sam launched an aggressive and successful marketing campaign to make savings bonds a popular holiday, graduation and all-purpose gift.

Like Wheaties, savings bonds enjoyed a string of celebrity endorsers over the decades including Lassie, the Lone Ranger, Superman, Bugs Bunny and Bullwinkle. (One film clip from the 1930s shows Bing Crosby singing a sales pitch for bonds in front of rows of marching sailors. The lyrics: “We’ve got another bomb to buy.”) In 1972, a TV ad presaging the gift-card era shows shoppers returning tacky gifts while a voiceover touts bonds as a gift that works for everyone. Awkwardly-worded dialogue on the benefits of bond-buying even made its way onto such middle-American TV shows as “Father Knows Best,” “Cheers” and “WKRP in Cincinnati.”  (Click here for a montage.)

It was only after Congress pulled the plug on marketing savings bonds in 2003 that sales slipped precipitously. In 2011, the U.S. Treasury sold $2.4 billion in savings bonds, compared to $11.3 billion in 2003.

Savings bonds deserve a comeback, if only as a small, retro-chic protest against holiday mass consumption.

As anyone who has been following the “fiscal cliff” discussions knows, the nation is about to embark on a long-term, serious discussion about how to put the federal government’s fiscal house back in order. But an equally important conversation is restoring the personal balance sheets of American households as well.

Reviving a tradition of Christmas-time savings—with the gift of just one savings bond to your child—could be one small step toward that goal.

Anne Kim is Senior Policy Strategist at CFED, a Washington, D.C. non-profit.

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