Welcome to Baby Bonds
A good time to look at investing in Baby Bonds, or trading T-Bonds is today's date of . . . Baby Bonds are savings type of securities available in fairly low denominations of $5000 or lower. The financial market baby bonds are either early U.S. government savings bonds or small denomination. However, the most popular bonds for futures traders are 30-year Treasury Bonds. Mini bonds, i.e. Baby-Bonds, are less commonly traded. BabyBonds are issued by various cities and states usually to fund government construction projects. The savings bonds typically have maturity periods of 7 to 15-years, and are zero-coupon-bonds, most often rated-A or better in the financial bond markets.
There are no fees or sales commissions to buy US government baby-bonds and they are usually purchased in-person by small investors from the local governments' treasurer's office who has issued the babybonds. As an example of a baby bond, the City of New York recently offered a government Baby Bond which may be purchased for $975 with a face-value or redemption value at maturity of $5000 face value if redeemed after 11-years, which results in a interest rate yield of 6 percent.
Baby bond buyers are responsible for managing the baby-bonds themselves from storing the baby bonds, keeping the actual bond, to remembering the baby bond maturity dates when it obtains full cash value and can be redeemed. Baby Bonds may be deposited in a broker's account, if the baby bond owner has a brokerage account.
Some large financial institutions are acknowledging baby bonds as a growth market and make good investments similar to International Government Bonds and 30-Year Treasury Bonds. Brokers and institutions subsequently are starting to offer baby bond financial management wealth services to their wealthy brokerage clients.
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Baby Bonds & US Savings Bonds as Gifts
You can give savings bonds for any occasion or purpose - like birthdays, weddings or graduations. You can buy gift bonds in several denominations and choose either electronic or paper form.
Buy Electronic Gift Bonds at Treasury Direct
To buy an electronic savings bond:
- You must already have a Treasury Direct account.
- Use the Gift Box functionality to buy gift bonds.
- Keep them in your account until you're ready to deliver them.
To give an electronic savings bond, you must know the recipient's:
- Full name
- Social Security Number (SSN) and/or taxpayer ID number
- Treasury Direct account number
When the bond is delivered to the recipient's Treasury Direct account, he or she will get an e-mail announcing your gift.
You must be 18 or older to create a Treasury Direct account and to buy gift bonds. A child under 18 can get gift deliveries in a Minor linked account.
Buy Paper Gift Bonds at Financial Institutions
To buy paper gift bonds:
- Visit any financial institution, fill out the purchase application, and pay the cashier.
- You'll receive your bond within three weeks. If you're making a last-minute purchase, ask the financial institution to mail the bond directly to the recipient.
- Ask for a gift certificate or download and print one below.
If you don't know the recipient's SSN, you can use your own SSN. Should this happen:
- Your SSN will appear on the bond. (The first five digits of your Social Security number will be hidden and replaced with asterisks).
- You'll incur no tax liability.
- It won't be used toward your annual purchase limit.
Gift information can't be printed on savings bonds. So announce your savings bond gift with a gift certificate.
Parents can help Children Save Money for their Future
Parents should open a savings account for the newborn baby. Encourage family members to give money gifts for birthdays and holidays. This money quickly adds and will be appreciated by the child when ready to buy a car or towards college education.
Once you decide what you're saving for and when you'd like to have it — you can decide how you should save and invest.
The best time to learn about money is when you're young and still in school. Starting young lets you take advantage of the magic of "compound interest."
What Is “Compound Interest”? Compound interest is the interest you earn on interest.
Illustration Using Basic Math
If you have $100.00 and it earns 5% interest each year, you'll have $105.00 at the end of the first year. But at the end of the second year, you'll have $110.25. Not only did you earn $5.00 on the $100.00 you initially deposited — your original "principal" — but you also earned an extra $0.25 on the $5.00 in interest. Twenty-five cents may not sound like much at first, but it adds up over time. Even if you never add another dime to that account, in 10-years you'll have over $162.00 through the power of compound interest, and in 25-years you'll have almost $340.00.
Rule of 72
The Rule of 72 — really just a “rule of thumb” — is a great way to estimate how your investment will grow over time. If you know your investment’s expected rate of return, the Rule of 72 can tell you approximately how long it will take for your investment to double in value. Simply divide the number 72 by your investment’s expected rate of return (ignoring the percent sign). Assuming an expected rate of return of 9 percent, your investment will double in value about every 8-years (72 divided by 9 equals 8).
Knowing how quickly your investment will double in value can help you determine a “ballpark” estimate of your investment’s future value over a long period of time. Let’s say that you invest $10,000 in a retirement plan. What will your investment be worth after 40-years, if you don’t make any additional contributions? Assuming an expected rate of return of 9 percent, the total approximate value of your investment would double to $20,000 in 8-years, $40,000 in 16-years, and $80,000 in 24-years, $160,000 in 32-years, and $320,000 in 40-years.
Magic of Compound Interest Using Pizza as an Example
Here's another way to look at compound interest. How much is a slice of pizza worth? Would you believe as much as $64,000? If a slice of pizza costs say $2 and you buy a slice every week until you are old enough to retire, you will spend over $5,000 just on pizza. If you give up that slice of pizza and invest the money instead, earning say 8% interest compounded yearly for 50-years, you will end up with $64,000. Isn't that interesting!