random thoughts and thoroughbred selections

Monday, November 15, 2004

The gift that keeps on giving�

I was a smart kid.

No, that�s not exactly where the �Boy Genius� thing came into play. That�s another story altogether (and one that I�ve told before). Anyway, back in the day I was pretty smart. Good grades, always near the top of the class. When my dad moved us back to our hometown from Utah, due to the differences between the schools, I already (technically) had enough credits to graduate.

Yes, I was that kind of overachiever.

Due to being in the top 3% of my graduating class (something like that), I was invited by the school district to a dinner celebrating Excellence in Education. Not that those losers could take more than half the credit (K-Fifth, then Senior year) for my academic brilliance, but I�ll let them buy me dinner anyway.

I got the chicken. I think it was Cordon Bleu, which is French for �cooked hours ago and kept just above room temperature since.� I also got to take a teacher from my past with me to this dinner (had to reach back to fourth grade for that one). They even gave me a certificate telling me how cool I was.

And I also got a $100 US Savings Bond.

I was floored! They�re giving me $100 just for showing up and eating some lukewarm chicken? Umm� hardly.

See, when you�re a kid who�s never gotten a savings bond before in your life, you see the $100 �face value� on this thing and you feel like you hit the lotto. Well, slow it on up there AJ Foyt, because there�s a couple things you need to know about these bond things.

You and Your Bond: What Your Well-Meaning Giver Didn�t Tell You

Congratulations! You are the new owner of Government Debt! That piece of paper in the greeting card where the $20 bill was supposed to be is your ticket to the future!*

*(Assuming �the future� to be more than 12 years away, and �tickets� to be no more than the face value of your bond.)

Unlike goldfish that die, and dogs that need to be fed and walked, your bond will not only be with you a long time, but will provide you with hours of activity** over the next decade!

**(Watching 2% interest compound every six months)

By now, if you have returned from the bank after finding out that you are unable to redeem your bond for actual cash, you�re ready to explore the wonders of bond ownership.*** First of all, get comfortable. You�ve got quite some time to learn all about bonds. Ten or more years to be exact! That�s how long it�s going to take for this piece of paper to remotely approach the �face value� that�s printed on the front.

***(Results may vary)

So you�re asking yourself, �If this piece of paper represents $100 or more, but I can�t get that money for another ten years, who�s got my money now?�

It�s funny that you ask. Please refer to Figure 1 below, which will outline all bonds purchased in the last 20 years, and who actually got the money you were supposed to get instead:

Figure 1
Who�s Got My Money?
Bond Purchase Year --> Money Recipient
1984-1988 --> Lockheed, Northrup Grumman, Nicaraguan Contras
1989-1992 --> Wars designed to protect the President from being called a �wimp�
1993-2000 --> Whining underachievers with their hands out, Partisan spin doctors
2001-Present --> Halliburton, �Bill Clinton is the Antichrist� T-shirts

Don�t worry though! They�ll pay you back!

So you�re asking yourself, �What am I supposed to do with this thing?� Well, first you be a good boy and thank your Auntie Ruth for the thoughtful gift.

No, I�ll wait. Go ahead.

There, much better.

Next, find someplace that�s fairly safe in which to keep this bond for the next dozen years. Trust me, it says �$100� on the front, you�re going to feel guilty if you cash it in three years early for $11 less than face value.

After that, forget about it. Go outside, get some color. You know what they always say� A watched bond never compounds.

Someday, and it won�t be for a long, long time, you�ll unearth this bond. You�ll check the website. You�ll note that your $100 face value bond is worth $103.89 after thirteen years.

And you�ll quietly rue the day Auntie Ruthie brought this thing into your life.

When you�re seventeen, $50 is a lot of money. That�s four CDs. Seven tanks of gas (circa 1991). Two Lollapalooza tickets.

Thirteen years later, $103.89 isn�t enough to pay your car insurance. It�s a week of groceries. It�s FOUR tanks of gas. It�s less than 5% of what you bring home net in a month.

Congratulations. I hope thirteen years of compounding interest brings you some sort of satisfaction.

Can you tell I�m irritated? Talk about a useless gift. I barely even remembered having this thing stashed away when I was, sadly, informed that the couple hundred dollars I was counting on for a bonus wouldn�t be there this quarter. Not that $103.89 really replaces that, but it�s better than nothing.

So for Xmas, give the gift that keeps on giving (at a rate of 2% compounded monthly and added every six months for 30 years). US Savings Bonds are the perfect way to tell someone how little you really give a shit!

[>>]posted at 5:26 PM by BG - click to email
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