Saving, investing habit makes good gift

Tobie Blanchard, Tucker, Jeanette A.  |  12/16/2009 4:33:58 AM

News Release Distributed 12/15/09

Many doting grandparents (and others) have established family traditions of giving U.S. savings bonds as holiday gifts. Gifts of bonds help grandchildren save for the future and teach them about investing at the same time according to LSU AgCenter family economist Jeanette Tucker.

Today’s economy has many questioning if gifts of savings bonds are a smart investment. Tucker says savings bonds are still a wise choice.

“U.S. Savings bonds are the ultimate safe investment, with the full backing of the federal government,” Tucker said.

Savings bonds can be purchased from www.treasurydirect.gov or a local bank.

The interest that accrues on savings bonds is federally tax-deferred and state tax-free.

The interest rate on U. S. Savings bonds purchased today is low.

“This is a reflection of the current economy and the financial markets,” Tucker said.

The economist said rates on Series EE bonds are fixed at the time of purchase, but I bonds are subject to an adjustment in rate every six months based on a measure of inflation.

“If grandparents have purchased Series EE bond in the past, they may want to consider switching to I bonds for future gift purchases, expecting that as the economy picks up, so will inflation and interest rates,” she said.

Tucker suggested making contributions to Section 529 college savings plans as another gift alternative. One example is Louisiana’s Student Tuition Assistance and Revenue Trust (START) Savings Program administered by the Louisiana Office of Student Financial Assistance.

“This is an innovative college savings plan designed to help with the growing cost of educating children after high school,” Tucker said.

Educational Savings Accounts may be opened on behalf of a named beneficiary, provided either the account owner or beneficiary is a resident of Louisiana.

“Account owners may save at their own pace, in amounts they can afford, and still have their money professionally managed,” the economist said.

As an incentive to save, the state of Louisiana will annually match a percentage of the deposits made to an account during the calendar year. The amount matched depends up the category into which the account has been classified and the federal adjusted gross income reported by the account owner for the previous year. This match is called an earnings enhancement.

Some of the advantages to investing money in the START Saving Program include:

– No fees are charged to participants.

– Accounts are professionally managed.

– Deposits made to an account may be excluded from taxable income reported on the account owner's Louisiana tax return, up to $2,400 per year, per account, for single account owners and up to $4,800 per year, per beneficiary, for account owners filing a joint return.

– Seven investment options are offered to meet the unique circumstances of each account owner. These options range from very conservative to very aggressive.

“Regardless of the option selected, the tradition of helping recipients save for the future while learning about investing is a gift that can last a lifetime,” Tucker said.

Tobie Blanchard
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