Can US Savings Bonds be Negotiated by a Minor?

Minors can't buy bonds, but their parents can do it for them.

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Many a child has been given a savings bond as a gift from a doting relative. The child who enjoys saving might want to purchase more  bonds on her own, maybe thinking ahead to college. That’s not possible, though. According to the federal government’s TreasuryDirect, the online conduit for electronic savings bonds purchases, a minor can't open an online account or buy bonds on her own.

It’s the Law

Though the law forbids minors from conducting such financial business, other laws provide ways for minors to have assets and investments purchased in their names. Under the Uniform Gifts to Minors Act and the Uniform Transfers to Minors Act, adults can open financial accounts and purchase investments in the name of someone under the age of 18. This includes accounts containing savings bonds. A custodian, typically a parent, manages the account until the minor reaches the age of 18.

Purchasing Bonds

Currently, the government offers series EE and I bonds, which can be purchased online through the TreasuryDirect website. Paper I bonds can only be purchased by using an Internal Revenue Service tax refund and can be registered in anyone’s name. To open an online savings bonds account on behalf of a minor, the custodian -- a parent, guardian or someone providing the minor’s main support -- opens a primary online account with TreasuryDirect, then opens an account for the minor. This minor account is linked to the primary account. The custodian uses it to perform transactions for the minor, including purchases.

Redeeming Bonds Online

EE and I bonds don’t have to be held until maturity and can be redeemed one year after the purchase date. A custodian uses the minor account established on TreasuryDirect to redeem electronic bonds on behalf of the minor. Since the bonds are supposed to be investments for the long-term -- they mature in 30 years -- you pay a penalty if you cash them in before they’re five years old. For both series, the penalty is the last three months of earned interest.

Redeeming Paper Bonds

Banks don’t have to cash paper savings bonds, so call in advance to learn the institution’s policies. If the minor is too young to understand the transaction and sign the bond -- something the bank decides -- the custodian can redeem it. The custodian must live with the child or have legal custody to do this. In any case, the bank will check identification documents such as a passport, driver’s license or birth certificate. If the bank won’t help, you’ll need to mail the bond to the Federal Reserve. Before sending it, a bank must certify or guarantee the required signature.