A savings bond is a treasury security for investors. They are issued both as paper bonds and electronic savings bonds. They cannot be traded but can be redeemed after only one year. There are no dividends, per se, with a savings bond, as the interest payments are simply added on to the value of the bond, but as tax-deferred items, the interest doesn’t have to be reported to the government until the bonds are cashed.
During these unpredictable times, more investors have started looking for a safe haven for their money. While no place is completely safe these days, savings bonds do offer a great alternative to riskier and more volatile investments.
What are US savings bonds? They are debt obligations of the US government that give a market rate of return that is compounded semi-annually and accrued monthly over the lifetime of the bond.
The value of a savings bond varies with the kind of bond purchased – series A, B, C, D, E, EE, F, G, H, HH, I, J and K. It also depends on when it is cashed and what kind of interest it has been assigned. Since 1935, the treasury has issued savings bonds in alphabetical progression. For example, series A bonds were offered the first year, Series B bonds followed in 1936, Series C ran from 1937-1938, and Series D were issued from 1939-1941. Series E bonds, longest running of the treasury savings bonds, ran from May 1941 until they were discontinued in 1980.
There are three main ones:
Series EE bonds were brought out in 1980 to replace the series E. They can be purchased at half or full face value. They come in amounts between $50-$10,000, and carry a maturity date of between eight to thirty years. Those cashed in before the fifth year are penalized three months’ worth of interest.
If EE bonds are purchased through a bank or other financial institution, it is also known as a Patriot Bond. There were more kinds of savings bonds, including the series F and G (which were offered to all investors except banks), series H, HH, Series I, J and K.
A) Competitive interest rates and monthly interest accrual -
How do we calculate the value?
Since the bonds are offered by the U.S. government, the interest rates are pretty competitive. The bond interest payments accrue monthly and are compounded every six months resulting in a faster growth of your investment.
If you were inspired by this essayyou might also like finding out about United States Savings Bond as well as Savings Bond Redemption.
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