Savings bonds are among the safest types of investments available. These low-risk investments are backed by the U. Since savings bonds carry little risk, the rate of return is modest.
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Savings bonds are one of the world's safest investments. Backed by the full faith of the U. Government, savings bonds offer a safe place to build savings for the long-term at the cost of a relatively low investment return.
When purchasing U. Treasury bonds, you may have wondered why Series EE savings bonds mature on different dates. For example, the U. Treasury's EE bonds issued in and took only eight years to reach full face value, while the same EE bonds issued in took twenty years to reach their full face value.
It accrues interest until the bond matures. Then, when the bond matures, you get the bond amount plus the accrued interest. The difference between the purchase price and the redemption value is taxable interest income.
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There are many kinds of bonds, but they all have a few things in common. Bonds earn interest that is either paid to you periodically or that accrues, meaning the interest is added to the bond, increasing its value. Another general characteristic is that the bond issuer that sold the bond to borrow money has to repay it on a specified date called the maturity.
Bonds are essentially IOUs issued by governments and corporations to borrow money. Bonds pay interest and usually carry less risk than stocks, so they provide a good way to diversify your investments. On a specified date called the maturity, the issuer must pay back the borrowed money.
However, the funds principal and interest in your Payroll Savings Plan are safe, guaranteed and will be honoured. Bond series in your plan will continue to earn interest until redemption or maturity, whichever comes first. You can redeem your funds at any time.
It was a very generous gesture on their part and I redeemed my US Savings bonds when I went off to college, where they certainly came in useful. And I think that just about sums up what most people know about US Savings Bonds — they look cool, and one day they will be worth a lot of money since they are often purchased at less than face value. Hopefully, this primer will give you a better understanding of US Savings Bonds — what they are, and how they work.