FinancialPlanningAdvices.com » How to Save Money Advices » Savings Bonds Basics

Savings Bonds Basics

Banks and credit unions offer to their clients savings bonds. However, many people are unclear about their nature and characteristics. If you are one of them, keep on reading this article, because it will provide you with basic knowledge on this product.

What are Savings Bonds

The US Treasury Department is the institution responsible for issuing savings bonds. The latter are classified as securities, which provide the US government with financing funds. The government will reward you for the favor of lending it your money with interest.

How do Savings Bonds Work

The overall economic condition in the country will determine the amount of interest that you will receive on the savings bond. The higher the interest on savings bonds is, the higher the interest rates in general increase. The website of the Bureau of Public Debt represents a good source of information about the rates that are currently paid as well as some statistics on the past rates.

Savings bonds are qualified as relatively safe investments and the interest they provide is relatively competitive. The returns you can get are additionally furthered by the potential tax benefits that you may get since interest that is paid by savings bonds is not periodic and as such is not subject to income taxes. Instead, as years pass by, the value of these bonds rises and the interest income claiming can be delayed upon bonds redemption.

You can also take advantage of the Educational Savings Bond Program if you meet the eligibility requirements. The earned income can be deducted from taxes if the bonds are cashed and the money is used for financing qualified higher education.

State and local income taxes are not charged on the interest income generated by savings bonds. As a result, you are given the opportunity to spend more money from your earnings. This varies from one state to another and can make a big difference on your money.

Where to Buy Savings Bonds

If you are frequent user of the Internet and are comfortable with it you can purchase some bonds online from the Treasury Department. The process is easy and will save you plenty of time since it takes several minutes to complete a purchase.

The website of the Treasury Department is very user friendly, which will greatly facilitate your work. All you have to do is to enter some personal data. You are also given the opportunity to link one of your bank account to the account you create.

You can select from a number of Treasury securities when you create and log into your account.

Finally, do your homework before purchasing US savings bonds in order to be sure that you understand what you are actually getting and giving.

Rate this article : Low
  • Currently 2.8/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
High