Although safe and secure compared with other riskier business ventures, buying savings bonds is not as simple as it may appear at first. The basic idea is you lend money to the US government and it will pay you back the principal along with some interest. But due to the constant changes in the rules, they can be a little confusing.
Are These Bonds a Good Investment?
It can be depending on what you want. The main strength of bonds is that they are safe and profit is assured. But savings bonds have a very low interest rates compared with other investment options such as the stock market. You can use it as an alternative to a low-interest bank account, as a modest income generator, or as a help realize a medium range financial goal (say, 5-10 years). It's not a good idea to invest long term (as in 20-30 years), nor should you put all your money in it.
What are the advantages?
Unlike other investment schemes, they require very low capital-as low as $25 depending on where you buy. Bonds are a safe place for your money, so if you don't enjoy taking risks, it will give you peace of mind. You don't need to pay a commission to a broker when you by or sell either. Further, savings bonds are tax-exempt and the interest can be put off.
Someone just sold some to me at an online action. How do I use them?
These have no real value, except as novelty or collectible items. The legal ownership of these does not change hands even if the papers themselves do. You only own an interesting item, you do not have any rights to the real bonds that the government will pay to. The original owner still has the right to all of it.
Where Can I Buy?
You can buy them directly from your local bank or on a treasury bonds website. Unlike stocks, you don't need to hire a broker to carry out the transaction for you. If you buy paper bonds, you will receive them in the mail some time after purchase.
I Heard Savings Bonds Are Non-Transferable; Can I Use Them As Collateral?
No, you may not.
What is the Series EE Bonds That I Hear About?
Series EE bonds are the most popular savings bonds around for individual investors. Series EE bonds sell for half their face value. Those bonds released after May 1, 2005 accrue interest at a fixed rate.
When Can I Redeem My Savings Bonds?
You can redeem bonds in less than a year, but you will incur a penalty, much like if you withdraw money from a bank too soon. If you redeem your bonds within less than 5 years from the date of purchase, you lose interest from the last 3 months. After 5 years, you can cash the bonds anytime without penalty. Therefore, you should not set about buying savings bonds unless you're sure you won't need the money for a while.
To learn much more about Savings Accounts and your options, visit http://savingsaccountbuzz.com where you'll find this and much more, including information about a Money Market Savings Account
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