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Stocks & Bonds

Financial Gifts That Grow

These stocking stuffers are a smart investment for all the good little girls and boys on your shopping list.

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Back when savings bonds dangled juicy yields, they were natural stocking stuffers for kids. (And it didn’t hurt that until 2012 you could buy a paper certificate instead of dumping the money into an electronic account.) As we went to press, series EE bonds were paying a paltry 0.20% fixed interest rate, and little change was expected when the Treasury Department announced rates for bonds issued on or after November 1.

See Also: Gifts That Keep Giving

Still, a savings bond could be a good bet for a new baby. Although early redemptions are restricted, if you hang on for 20 years — in time to pay some college expenses — the Treasury guarantees that an EE bond will be worth at least double the purchase price. That’s an effective yield of 3.50%. You can buy a bond for a minimum of $25, and up to $10,000 per calendar year, through TreasuryDirect.

You may want to contribute to a child’s tax-advantaged 529 college savings account or set up an account with the child as beneficiary (for our 529-plan picks, see The Best List). Or you could buy shares of stock. With ShareBuilder, you can open a custodial brokerage account for a child. ShareBuilder requires no account minimum and doesn’t levy inactivity fees. Online trades are $7 each.

If you’d rather stick with a gift that’s safer than stock but more flexible than a savings bond, check out the free SmartyPig savings account, which recently yielded 1%. At www.smartypig.com, you can buy a physical gift card for $25, $50 or $100 (or choose a value between $10 and $200 for a virtual gift card) and send it to your recipient, who can use it to fund a new or existing account. (An adult must open an account for a minor.)