If you think of the world of savings bonds as sleepy and never changing, think again. In the sluggish market of the past few years, investors have flocked to savings bonds in droves, doubling their sales since 1999. It would seem like the savings bond business is firing on all cylinders and that if it's not broken it shouldn't be fixed. But fixed it's going to be, nonetheless.

A recent USA Today article noted the following planned changes:

  • Minimum holding periods have been increased for EE and I Bonds, from six months to one year.
  • Interest rates have been reduced. The I Bond's fixed rate, for example, fell to 1.1% in May, from 2% a year earlier. (The I Bond's total rate also has an inflation adjustment component. With the current adjustment, the total recent rate was 4.66%, but should inflation slow or fall, the I Bond's return won't be pretty.)
  • HH Bonds will be discontinued in 2004. (Their interest rates have also been cut, from 4% to 1.5%.)

If all that isn't bad enough to make bond investing less attractive, here are some changes that will make buying bonds less convenient:

  • As of next year, credit cards won't be accepted. Buyers will have to have money taken from a bank account.
  • Say sayonara to paper bond certificates. Bonds will become totally electronic as of 2005.
  • Bonds will mainly be sold online, not via your friendly local bank. This is great for us computer-friendly folks -- but many people, especially seniors, aren't inclined to buy things online, or are not comfortable doing so.
  • 41 regional Treasury marketing offices will be closed, axing 100-plus jobs.

Why all the changes? To save money. That's a worthy goal, to be sure. Few Americans would quibble with any plan to curb unnecessary government spending. But the cost of these changes (including lost sales) may outweigh the benefits.

Regardless of these changes, investors who buy savings bonds for children might want to consider buying the urchins a few shares of stock in strong and growing companies instead -- these include the likes of PepsiCo (NYSE:PEP), Microsoft (NASDAQ:MSFT), Wal-Mart (NYSE:WMT), Procter & Gamble (NYSE:PG) or ExxonMobil (NYSE:XOM). Kids may enjoy such an investment more, as they follow their companies' progress.

Check out the Fool's bond basics page, and if you like, do your homework first at the Treasury Department's SavingsBonds.gov site.

For guidance on how best to invest your short-term moolah, click over to our Savings Center, which features some special interest rates for Fools.