Many consumers who are unhappy with the often low interest rates being offered for savings accounts with your bank might want to consider researching United States Savings Bonds as an alternative.
As consumers are more apt to find a safe place to put their cash in light of the recent economic events of late, Savings Bonds are a good choice due to their being backed by the United States government. Much like the banks that are insured by the FDIC, savings bonds purchasers can rest assured that their money is secured because the federal government is obligated to repay both the principal and the interest on the bonds. As long as there is a government, there is protection with savings bonds.
The Additional Benefits
Since savings bonds are issued by the federal government, they are exempt from local and state taxes and the interest earned on bonds can be tax deferred until it is redeemed, which is not the situation with regular savings accounts or even Certificates of Deposits where interest earned is taxable each year as income.
Types of Savings Bonds
EE – this is the standard saving bond. They have replaced the E series which are no longer issues by the Treasury Department. These bonds earn a fixed rate of interest and allows you to calculate what your bonds will be worth in the future. Those EE bonds purchased between May of 1997 and April 30th of 2005 earn their interest based on a 5-year variable market based yield.
Electronic EE – These bonds can be bought online for the Treasury Direct Online http://financialplan.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=financialplan&cdn=money&tm=1449&gps=326_399_732_591&f=10&su=p284.9.336.ip_p649.3.336.ip_&tt=2&bt=0&bts=1&zu=http%3A//www.treasurydirect.gov/ and are sold at face value. These bonds can be purchased in any dollar amount provided it is over $25 with a maximum purchase of $5,000 annually.
Paper EE – These bonds are sold at half of their face value. The bond will then increase in value as the interest is earn. The bond will not reach face value until the date of maturity. These bonds are sold in denominations including $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000 but you can only purchase $5,000 worth per each calendar year as with the electronic EE bonds.
Series I – These are similar to EE bons but the way the interest is determined is different. The “I” stands for the word inflation, meaning that this bond’s interest is based on the rate of inflation. I bonds keep or outpace the inflation rate but the interest rate is a fixed rate that survives the life of the bond plus a semi-annual inflation rate. The inflation rate for this bond is determined once in May and November. Series I can be purchased as a paper bond or online.
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