Are U.S. Savings Bonds Still Relevant?

Jun 13 05:35 2007 Christopher Smith Print This Article

As a child, I remember getting my first savings bond. It was exciting! I was putting money away for my future, and getting a better rate of return on my money than the bank provided. Eventually, that little savings bond grew into a down payment for my first house. There are many reasons why your investment portfolio should hold onto some savings bonds, and its a shame that fewer and fewer people are taking advantage of this very useful investment vehicle.

Chances are,Guest Posting even if you have never received a savings bond in your name or had anything to do with them, you probably have some idea of what a U.S. savings bond is. If not, it's okay; they seem to be dwindling in popularity as of late, as fewer people are educated every day on the benefits of a U.S. Savings Bond. If you aren't really sure what a U.S. savings bond is and how they may or may not have a place in your life, read on for more information.

US Savings Bonds - What Are They?Savings bonds are a type of long term investment that used to be rather popular. There are a whole slue of different types of savings bonds out there, but this type of savings bonds are by far the most reliable, being backed by the United States government in quality and guarantee, and that is something that definitely plays on the positive side of the U.S. savings bond.  In all actuality, a savings bond of this type is actually a loan to the U.S. government and the bond itself is a guarantee that the 'loan' will be paid back in full after a set period of time during which the bond will mature.

Where Can U.S. Savings Bonds Be Obtained?A great place to buy a savings bond is at your local bank.  The most popular type of US Savings Bond are the Series EE which can be purchased at half the face value.  So a $100 bond would cost $50.  The minimum purchase is $25 while the maximum is $30 000 (although, you can purchase an additional $30 000 electronically).  These types of bonds earn market based rates which change every 6 months.  As such, there is no way to predict when it will reach its face value.  These bonds much also be held for a minimum 12 months.

The other type of US Savings Bonds are the I Bonds which are an accrual type investment. Simply put, interest is added to the bond on a monthly basis.  The rate of interest is determined each May and November and is based on the Consumer Price Index.

When Can I Cash in My US Savings Bond?Depending on the type of bond you purchased, the maturity date will differ.  Knowing your savings bond before you buy is always a smart move.  Since you purchase your I Bond at face value and receive interest annually, you can cash in any time after the 12 month period after you initially bought. However, its important to remember that if you cash in your I Bond within the first 5 years, there is a 3 month interest penalty. This is to encourage long term savings.   As for the Series EE Bonds, if you hold til maturity, you do not get interest on your investment after that period. So remembering your maturity date is key.  You can cash in your Series EE Bonds any time after the first 12 months after you bought them.

There is of course that little annoying thing called taxes! There are some tax advantages to owning US Savings Bonds, so it pays to ask your bank about them.  If you are looking for a long term investment vehicle, that will help protect your hard earned money, then US Savings Bonds are for you. You don't have to own all savings bonds or all stocks. A mix depending on your age is always a good bet.  Protecting your money is what its all about.

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