Savings Bonds

When it comes to investing, you have many options. You can invest in the stock market, real estate or by purchasing savings bonds. Savings bonds are a less-risky investment option issued directly by the United States Treasury Department. Essentially when you buy a savings bond you are loaning the United States government your money and they will pay you interest over a period of time. This is the additional money you earn over time. If you wait until the bonds mature, you will get the largest possible interest rate on your loan. Learning more about savings bonds will help you decide if it may be a good investment for you. Here at PaydayLoansCashAdvance, we have broken down the basic information for you so you can make a wise decision when it comes to bonds.

How Much Interest Can You Earn?
The interest available for bonds varies depending on the current economic conditions of the U.S. When the interest rate for the country is high, the rate paid for savings bonds rises as well. If you wait to redeem bonds when they are fully matured, you get the highest possible value. Additionally, there are different types of savings bonds, and depending on the type of bond you choose, your interest will vary.

What Type of Bonds are Available?

  1. Series EE Bonds are issued by the government at half of their stated value. They reach a maturity rate 20 years after they are issued, but continue to earn interest for 30 years total. There is tax assessed on the earnings from these bonds at a federal level. However investors can decide whether to pay interest when the bond stops accruing interest or when they redeem the bond. This type of bond is intended for individual investors and will accrue interest monthly.
  2. Series HH Bonds are very similar to EE bonds, but they are sold and mature at face value. However, they do pay interest on that value annually. Unlike EE bonds, they are non-marketable.
  3. Series I Bonds are issued at face value but have a varied rate of interest. They pay out interest based on inflation. There is a restriction of only $5,000 per year, per person on these bonds. If the economy is in a recession, the US treasury can borrow against the interest of series I bonds, but not on the bond value. There is a fixed rate of return as far as interest though, which protects your investment from being swallowed by inflation.

Restrictions
United States Savings Bonds are covered completely by the United States Government, meaning there is not a lot of risk in choosing this form of investing. Despite this, there are some restrictions you should make yourself aware of before you dive into the world of bonds. First, you generally cannot cash in a bond within the first year of purchase, and you will be penalized if you cash them in within five years of purchase. The penalty for cashing them in is a loss of up to three month’s interest. Because of these restrictions, bonds may not be the right choice if you are looking for a short term investment or you worry that you may face financial difficulties in the coming years.

Purchasing Bonds
Quite often you can purchase these bonds directly from your bank, or you can work with the Treasury Department itself on making the purchase. The Treasury Department has made it very easy to make the purchase, so that more people can take advantage of this investing possibility.

Now that you know a bit more about savings bonds, you can decide if they may be part of your investment strategy. To get the best and most up-to-date information, contact your investment broker or financial planner and let them know you are interested in including savings bonds as part of your portfolio.

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