That is a terrible return over 30 years. The market usually gets you ~8% returns, depending on how aggressively you invest.
You don't actually want a 20 year CD, especially since interest rates are at an all time low. Your money is stuck. For 20 years.
Ideally, you'd open a 527 for the kid and let the nest egg grow tax-free.
As I said, kind gesture, terrible investment.
Okay, no offense, but your first point's kinda stupid. The average person has no idea how to make a wise investment on the market. Let's talk about average people here, because it's obvious that the economically savvy are going to see much higher returns.
Plus, unless you are the kid's parent or a really
close relative, you aren't going to be watching the market in the first place. It's more like you'd invest and hope that in 18-20 years you actually... y'know... made money.
The 20-year demand isn't really a problem for a gift, so I'm assuming we are talking about personal investments here. And it's a reasonable concern. But to be fair, if you are looking for a good return with minimal effort, then bonds aren't an awful choice.
Interest rates are at an all time low for pretty much everything, aren't they? You're still fortunate that a bond has a bi-annual rate.
And the interest on bonds is tax-free, according to the treasury website.
And I have no clue what a 527 is, but wikipedia is telling me it's a tax-exempt organization intended to fund candidates in political races.
I'm assuming you meant a 529? These are certainly a good idea (particularly because you don't need to lock up the money). And many of them get to avoid certain state/federal taxes. But they can only be used for college investment, AFAIK. You can't just make one for yourself. Many of them also have expenses built in--for instance, I'm looking at a NJ-specific one right now, and it will eat as much as 2% of what you put in. That's not a small sum, in the long run.
The nicest part of this one is that NJ ignores it when it comes to issuing state aid for education. IDK if that's universal or not. But very nice if you have a lot in it.
I can't find the interest rate on these accounts anywhere, but I'm assuming it's decent. Definitely a nice alternative, if you are looking to provide for a child. But that's all they are good for--giving a gift to others or making a personal investment is a different story.