Perhaps you may have seen an old World War II bond poster or a movie with a request for American citizens to buy war bonds. These bonds that were originally known as “war bonds” are today more commonly known as savings bonds. During World War II, these war bonds were offered to the population to help pay for the many costly wartime expenses. The savings bonds that we see today still are an important way to help the government continue to run smoothly.
A savings bond is a debt instrument that the US government has used for years. It provides savings certificates to any investor and they are considered one of the safest types of investments in the United States. The reason for this is because they are backed by the federal government. Initially, you could purchase a savings bond for the low amount of $25 which made them an accessible investment for both rich and poor.
A savings bond will grow in value and at maturity, you can redeem it. Many parents purchase these type of savings bonds for their children’s future college education. Savings bonds also provide a tax benefit because you will not have to pay income tax on the earnings until you redeem them. They are definitely a good steady investment vehicle for anyone who is considering to add to their long-term investment portfolio.
There are three types of savings bonds and they are distinguished by how they pay interest. The three different types of savings bonds include the H/HH series, the E/EE series, and the I series. Before 1980, the bonds were the E and H bond series. After 1980, these two bond series were replaced by the EE and HH bond series. In 1998, the US government introduced a new inflation index I series bond.
A savings bond is a great way for a person who has limited resources to begin an investment program. The government offered the EE series bond at a price which is one half their face value. The face value of these bonds can range from $50-$10,000. When the bond matured, the owner was able to redeem the bond at its face value. Each year, you were allowed to purchase a maximum of $30,000 in series EE bonds. These bonds would earn interest for 30 years.
The HH series bond will earn interest for 20 years. Since September 2004, the E and EE series bonds are no longer available. The series I bond that is now being sold and is sold at its full face value. It has a beginning $50 minimum denomination. Other denominations include $10,000, $5000, $1000, $500, $200, $100, and $75. The I series savings bond can earn interest for 30 years and you will be paid that interest when you cash in the bond.
Savings bonds can be purchased in a variety of ways including a savings program through your company’s payroll deductions. Many employees utilize this format to purchase a very safe investment that will enhance their future investment portfolio.