What is a Savings Bond?

Savings bonds were first introduced in 1935 as a means for investment under President Franklin D. Roosevelt. Roosevelt used them as a way to raise money for the government at a time in our countries history when borrowing money from other countries was not an option. They helped fund the government, while at the same time gave individuals an option for investing and earning money.

Savings bonds offer a different type of investment than most options that you see today. They are funded and distributed by the government. Although the rate of return is significantly smaller than the earning potential of investment into stocks, bonds and mutual funds, the investment is considered virtually safe and secure. In the past it was a way for people to save for retirement and is still used today by many investors who want to have some of their money is a secure place.

Bonds have emerged throughout the years and there are different series, for example, the E and I series that you can purchase. Most bonds are purchased for one half of their face value and mature after a set amount of time. After they mature, they do continue to make interest. Some newer bonds are purchased at face value, and offer a variable interest rate that is tied to inflation.

Savings bonds can be cashed in at any time, but usually need to be held for a minimum of five years to avoid any cash in penalties.

There is a limit to the number of bonds an individual can purchase in a years time. You can purchase savings bonds electronically through the US Treasury on the internet or at your local bank or credit union.

Leave a Reply

Your email address will not be published. Required fields are marked *