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Are savings bonds still necessary?

February 25, 2015

In the past, savings bonds used to be great gifts to help start children on their path to savings. Although the days of buying paper U.S. savings bonds are long gone, there are still ways to purchase them.

LibertyBond-WinsorMcCay

First a little history. U.S. savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government’s borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.

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A lot has changed over the years regarding how to purchase and save with a savings bond. Many of the previous benefits are no longer available:

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  • Fixed interest rates have gone down to .10 percent since 2005 when they were 3.5 percent for EE Bonds, but are currently 1.48 percent for I Bonds.
  • As of 2012, you can no longer purchase and gift EE paper savings bonds and I paper savings bonds can only be purchased with a tax refund.
  • Previously you could buy a $50 savings bond for $25 making it a great investment, but now you can only purchase bonds at face value. For example, a $50 savings bond now costs $50.

Although many things have changed, there are some advantages to purchasing modern savings bonds:

  • You can now buy a savings bond electronically via the https://www.treasurydirect.gov/ website after setting up an account for you and your recipient.
  • Unlike paper savings bonds, electronic EE Bonds come in any amount to the penny for $25 or more.
  • If you’ve lost your old paper bonds that you haven’t cashed, you can track them with your social security number and have them replaced.

Even though you can’t earn as much interest as  in the past, you can still earn money with savings bonds. With many other savings plans available, however, such as 529 Plans, bank savings accounts and CDs, it may be prudent to research the advantages of each option before purchasing a U.S. savings bond. Give us your feedback and share which benefits you like with the new savings bond regulations.

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