What You Need To Know About Savings Bonds
Savings bonds have become an increasingly popular method of savings over the past decade. Most parents and grandparents gift savings bonds to children as a way of putting money away for college or for any other future projects. But what are savings bonds and should you invest in them?
What is a Savings Bond?
Savings bonds are a loan made to the U.S. government. In return, the government will give you interest on the original deposit. This type of investment are mainly issued out by banks and is considered a “fixed term loan” meaning you will receive a higher return on interest compared to a traditional savings account.
Are savings bonds suitable for you?
Savings bonds may be a suitable investment option for you if you have a large sum of money for example $1,000 or more in cash that you would be willing to put aside for a period of 6 months or the agreed terms of the bond. If you do not want to risk losing any of your capital, savings bonds would be an ideal option.
How do savings bonds work?
Savings bonds are available in two different types: Series I and Series EE.
- Series I savings bonds combine a guaranteed fixed rate of return with an inflation adjustment.
- Series EE savings bonds pay a fixed rate of return and you are guaranteed to make double of your investment in 20 years time.
How can you purchase savings bonds?
You can now purchase savings bonds online via the Treasury’s website. There is also an employer-sponsored plan through which you can also purchase savings bonds. To purchase bonds, you need to have a minimum of $25 with the maximum limit being $10,000.
Pros and Cons of Savings Bonds
Savings bonds can provide you with a reasonable, inflation indexed returns. Furthermore, they are a stable, long-term investment option that offer several tax advantages. With the backing and safety of the U.S. government, you’re rest assured that you won’t lose your money. The only drawback with savings bonds is that there is an early withdrawal penalty.
In conclusion, savings bonds are a great idea if you’re looking for a low-risk investment option. Do your research and compare the different investment vehicles to determine what would best suit you.
Thank you for reading! If you enjoyed the article, hit the heart button to help other readers see it!
FYI: Original article found at Moneyantics.com
