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Alternative Gifts as Savings Bonds Go Digital

NEW YORK (MainStreet) -- The U.S. Treasury announced last week that it would end the sales of U.S. savings bonds after more than 75 years. As of Jan. 1, savings bonds can be bought only through the Treasury website, a measure it claims will save taxpayers $70 million during the next five years.

The real loser here is your grandmother.

The paper bonds have always been popular with older Americans, especially those who remember when the bonds first came along to help finance World War II. Getting a savings bond tucked inside a greeting card from your grandmother on your birthday or bar mitzvah is something of a rite of youth.

Parents and grandparents will have better gifts to give their children to put them on firm financial footing once the sale of paper savings bonds comes to an end.

If your grandmother still wants to get you a savings bond, she can buy one online, then print out a "gift certificate" explaining the terms of the bond and put that in the card. But there are better gifts parents and grandparents can give children to put them on firm financial footing. Here are a few.

Stock certificate
While savings bonds offer more nostalgia than rate of return, an old-fashioned stock certificate offers both. Sure, they've become rarer in recent years and are no longer required for proof of stock ownership, but some companies still offer them if you're willing to jump through a few hoops. Give one of these to your grandchild as a symbolic gesture, then help them open a mutual fund with a balanced portfolio so they can learn about investing. Chances are it will prove a much better investment than a savings bond.

Credit card
Children under 18 can't open their own credit cards, which is probably a good thing. But it's never too early to start learning responsible credit practices and building a credit rating. Open a credit card and list your teen as an authorized user, being careful to set their credit limit low so they can't screw up their (or your) credit rating too badly. They'll be thrilled to have a credit card of their own, but be careful not to give them too much leash or they might hang themselves.

A 529 plan
Hopefully your child or grandchild is heading to college. So why not do what you can to help them save for the massive tuition payments they have ahead of them? A 529 plan is a college savings account in which investments grow tax free, and the distributions are likewise free of taxes as long as they're used to pay college expenses. Open one of these on their behalf and they'll thank you later when they aren't completely buried in student loans. Of course, you can't exactly stick one of these in a card. We'd recommend putting an iTunes gift card in there and explaining the real gift while you have their attention. It will be more effective than printing out the relevant section of the tax code. Trust us.

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