Buy Savings Bond Offerings to Invest in the Future

Although you could say that taxes are one way that people are investing in the U.S., there are thousands of people in the country who buy savings bonds offerings to do this as well.  A bond like this is a promissory note that the government issues when someone loans the government money.  The note specifies what has been lent, when it will be paid back and at what rate of interest. 

Amongst the most popular of U.S. savings bonds are the EE bonds.  They gather interest for up to 30 years after they are issued but they are not transferable.  For this reason they are good gifts for family or a good way to start a savings for your children.  You need to let some time go by because cashing the bond within the first five years will attract penalties. 

Some basic things to know about EE bonds concern their denomination (the minimum amount to spend) and the relationship between their face value and the amount that you actually pay. The denominations available range from $50 up to $10,000. On sale from January 1980, you pay just half the face value, after which you leave them to gather interest before cashing them in, in up to 30 years time.

So, how do they compare with their predecessors, the series E bonds? There are some similarities. In both cases, the bonds are non-transferable. Denominations are almost the same, E bonds just started at $25 instead of $50. The differences come in terms of when you buy savings bond EE rather than E, because series E was purchased at 75% of its face value, rather than 50%. Also, series E bonds generate 4% interest as a guaranteed minimum (this is also compounded twice a year) if the maturity date is after March 1st, 1993.

Historically, the E savings bonds are also known as “war bonds” because they were issued in May of 1941.  Replaced by the EE series in 1980, E bonds were designed as a long-term investment. E bonds bought between 1941 and 1965 for example were interest bearing for periods of up to 40 years.

More recently, I bonds have also been launched by the government. They started first in 1998 and were issued as protection for investors from inflation.  For this reason they have a unique interest rate calculation that is a function of the inflation rate and the fixed interest rate that the government sets twice a year.  I bonds can be purchased in denominations from $50 to $10,000 and are purchased at face value (compare this to EE and E bonds). Interest is accrued monthly and compounded for up to 30 years. 

I bonds can be bought in a “definitive” or “book-entry” form, and you can buy them through your bank or through your employer. On the other hand, you can’t exchange them for HH bonds and when you buy savings bond I, you need to wait for a minimum of twelve months before selling.