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Savings Bonds

Can anyone explain how they work?

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Asked by Anonymous at 2:21 PM on Sep. 25, 2009 in Money & Work

Answers (3)
  • Savings bonds in general can be bought at any banking institution, credit union or even online at a government treasury website. They are extremely easy to buy because they are affordable. EE savings bonds can be bought at only half the denomination that they will eventually be valued, which makes it a long-term investment. Savings bonds can be bought at as little as $25 or as much as $10,000. For example, if you buy an EE savings bond of $50, you will pay $25 for that particular bond. Each person who purchases savings bonds can do so up to a total amount of $30,000 each year, or a $60,000 face value. The best thing about EE savings bonds is that they are completely safe and secure. They can be replaced if they are stolen, lost or destroyed as long as they have not been cashed or it is proven that they were cashed by the wrong person.


    Answer by dillonsma at 3:31 PM on Sep. 25, 2009

  • (CONT) They are based on a 5-year treasury security yield, which means that you should get your money back in full on the bond in only 5 years if bought before 2005, but after they guarantee that it will return your investment within 20 years even if the interest rates were extremely low. If you redeem them within the first 5 years of purchase, then you forfeit the 3 most recent months of interest, but after the 5 years is over you are not penalized.

    Answer by dillonsma at 3:32 PM on Sep. 25, 2009

  • (CONT) The way that I bonds vary from EE bonds is that they are bought only at face value, which makes it a quicker investment. You earn a fixed rate of return combined with a semiannual inflation rate. I bonds are also penalized if redeemed within the first 5 years. Typically, the I bonds mature faster because of interest rates, but that depends on the economy at the time of purchasing and redeeming. One last difference is that I bonds are only valued up to $5,000.

    Answer by dillonsma at 3:33 PM on Sep. 25, 2009

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