Investing in US Savings Bonds
You may have received them for your birthday or have a stash of them from when you were born. I am talking about U.S. Savings Bonds. As you may know, a bond is a written promise to pay back the principle, or what you originally paid for the bond, plus interest once it matures.
What are
U.S. Savings Bonds are bonds issued by the National Treasury. The type EE bonds are the type that you have probably received from family friends and relatives as gifts for birthdays, graduations, major achievements, etc.
EE Bonds are government issued and are low risk. Low risk is good because you don’t have to worry about losing money, and government issued bonds are always low risk. As of May 1, 2005, all EE bonds earn a fixed interest rate. This allows you to know what your bonds are worth at all times.
How can you get
U.S. Savings Bonds are easy to get. If you are still young, you can have your parents get them for you from the bank. You can get them in paper form in the denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. You buy them for half their face value, so if you purchase a $50 savings bond you only pay $25.
Don’t let this fool you. You will only gain interest on what you paid for. For example, if you pay $25 for a $50 savings bond, you can’t try to sell it to someone for $50 three days later.
Bonds are also available electronically from treasurydirect.com. With electronic bonds, you pay face value. If you pay $25 you get a $25 savings bond. There are no denominations, so you can pay $25 or more at any amount. This means you could buy a bond for $235.23 if you really wanted to. You can purchase up to $5,000 in one year.
What should you do with the
The best thing you can do with them is to save them. If you’ve only had them for a couple of years, they won’t be worth much more. If you’ve had them since you were born and are 15, they are worth a bit more, maybe double the principle. Still, I advise you to save it.
Spending your savings bonds on some music or a weekend trip is a waste. Think about how long you’ve been hanging onto them. Years of accrued interest should really be spent wisely. Now I know, how is that money any different than the paycheck you got last week? Well, it’s not, but the longer you keep it the more it will be worth, and besides, you don’t really need it now.
Savings Bonds should be saved until you really need it. I suggest you save it for college. If you are lucky enough to have scholarships or other help for college, spend it on a new car when you graduate or, better yet, put it towards retirement. Just remember to save, save, save!