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What Is a Savings Bond?

A savings bond is a long-term loan to the nation. It's security, but it doesn't yield as much as other investments.

A savings bond is a long-term commitment that has the unique potential to be given as a gift to someone you care for, including an infant. Let's take a look at how they function.

What is a savings bond?

A savings bond is a Treasury-issued loan to the United States government. You are lending money to the government as you purchase one. You should file as the owner or co-owner of a savings bond for yourself or anyone else, even though they're under the age of 18. Only the owner or beneficiary of a bond will cash it.

Series EE and series I savings bonds are available for auction, and you can buy them in an electronic way on the US Treasury's website, Banks and dealers no longer sell paper shares, but you can still redeem them at a financial institution. Savings shares, unlike most bonds, cannot be sold to other investors or held in brokerage accounts.

Series EE vs. Series I

The key distinction between these two savings bonds is the way their yields are calculated.

A fixed-rate sequence EE bond receives interest as well as a guaranteed return of twice the value if kept for 20 years. As a result, regardless of the interest rate, the bond receives a one-time increase at the 20-year mark to ensure that the value doubles. (Depending on the issue date, Series EE bonds purchased before May 2005 have a variable or fixed rate.)

A series I bond has a premium that is made up of two parts: a set rate and a twice-yearly inflation-adjusted rate. The theory is that your money will be safe from inflation, which is defined as an increase in the price of goods and services over time (i.e., you will need more US dollars to pay for the same items).


For a new EE bond, the existing rate is 0.10 percent, and for a new I bond, the rate is 1.68 percent. Interest is compounded twice a year and credited monthly. New bond rates change twice a year, in April and November, and any series I bonds you buy have semiannual rate changes as well.


Savings bonds are one of the best forms of deposits since they are guaranteed by the United States government's absolute faith and credit. To put it another way, the government is responsible for repaying you.

Amounts and limits

An EE or I bond can be purchased at face value for any number between $25 and $10,000 in penny installments. A bond, for example, may be purchased for $100.45. The maximum amount of electronic savings bonds that an individual will get in a year is $10,000. The annual limit for paper bonds is $5,000.


Savings bonds pay interest for 30 years, so you can cash them out after five years without tax. If you're familiar with certificates of deposit, a savings bond is similar to a 30-year CD that converts to a no-penalty CD in the fifth year.

Early withdrawal penalty

If you cash a savings bond until it has matured for five years, you will be charged the interest from the past three months.

You get the first 17 months of interest if you repay a bond at 20 months. One year is the earliest you will quit. There is no penalty for withdrawing after five years, so if you don't wait 20 years, you will miss out on the chance to double the value of your EE bond.

When should I consider a savings bond?

Investors who wish to minimize ambiguity and have a long time period for recovery should choose a savings bond. You may also offer a bond as a gift to a loved one, such as an infant, or leave an inheritance to another. Savings shares, on the other hand, aren't used in brokerage or bank accounts and aren't suitable for short-term savings.

How to buy a savings bond

The primary method of purchasing a savings bond is through the United States Treasury's website,; in particular, EE bonds are only available through this method.

There is only one way to purchase a paper bond: after paying federal taxes, you must purchase I bonds. While purchasing a paper bond is less easy, it can be a more enjoyable way to give as a gift.

Frequently asked questions

How do I buy a savings bond as a gift?
When paying your federal taxes, you must fill out a questionnaire for a paper bond. That will only be paid for with a tax return. Both you and your beneficiary must have a TreasuryDirect account to use an electronic bond. You'll just need to remember the recipient's full name, as well as his or her Social Security number or taxpayer identification number. Given the sensitivity of that detail, a savings bond is perhaps the best option for a loved one.

If you're offering a bond to a child under the age of 18, the child's parent must open a TreasuryDirect account in their name and the child's name and administer the bond on their behalf. You should still hold the bond until the child reaches the age of 18.

Why can’t I cash a paper bond bought from someone online?
You can buy and sell paper bonds as souvenirs or collector's pieces on auction websites. A savings bond, on the other hand, cannot be exchanged or altered.

Why are the current series called EE and I?
The US Treasury published bond series in alphabetical order, such as A, B, C, D, and so on. Series E bonds lasted longer than most, and E bonds were eventually replaced by Series EE bonds. Since Series I bonds are indexed for inflation, the I most likely applies to inflation.

How do I calculate the value of a paper savings bond?
The TreasuryDirect savings bond calculator can be found on their website.

What if I own a bond that isn’t an EE or I bond?
Many bonds that are no longer valid have most likely reached their maturity date. To locate the bond, use the U.S. Treasury's search tool. (

How to redeem a savings bond

If the loan is a paper bond, you can cash it at a local bank or credit union. Bring your identification as well as the savings bond. The bank will usually give you a tax form either right away or by mail. If a bank refuses to accept your bond, follow the instructions in the Treasury's guide. Log in to your TreasuryDirect account to validate redemption and deposit to a related checking or savings account whether it's an electronic bond. You should hope to collect the funds within two business days. Savings bonds vs. CDs

Certificates of deposit are bank accounts with periods ranging from three months to five years, while savings bonds are low-risk loans to the US government for up to 30 years. Savings bonds and certificates of deposit (CDs) will also be seen as part of an investment portfolio that prioritizes security over fast returns.

What are other safe investment options to consider?

If you like low-risk investments, you may be interested in finding more about U.S. Treasury bonds or CDs. Keep in mind that low-risk portfolios, including futures, have smaller yields than other forms of investments.

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