U.S. Savings Bonds


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.

U.S. Savings Bonds

What are ‘U.S. Savings Bonds’

U.S. savings bonds offer a fixed rate of interest over a fixed period of time. Many people find these bonds attractive because they are not subject to state or local income taxes. These bonds cannot be easily transferred and are non-negotiable.

Explaining ‘U.S. Savings Bonds’

U.S. savings bonds are one of the safest types of investments because they are endorsed by the federal government and, therefore, are virtually risk free. In fact, if the bond is lost, destroyed, or stolen, it can be replaced, since savings bonds are registered with the government. Although these bonds do not earn much interest compared to the stock market, they do offer a less volatile source of income. They offer a way to save for the future, as they cannot be cashed until at least six months after purchase, and the longer you wait to cash the bond, the more interest it accrues.

Purchasing and Redeeming U.S. Savings Bonds

U.S. savings bonds come in eight specific values: $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. The time it takes for a bond to mature varies, but it is often somewhere between 15 to 30 years. To read more about when bonds reach maturity, read How long will it take for a savings bond to reach its face value?

History of U.S. Savings Bonds

Shortly after the Great Depression began, President Franklin D. Roosevelt approved the U.S. Department of the Treasury to issue federally-backed savings bonds. The name of the bonds varied to reflect the times. Prior to World War II, savings bonds were called Defensive Bonds; after the attack on Pearl Harbor, they were called War Savings Bonds, since the money people spent on bonds went directly toward the war effort. In 1990, a new type of bond called an Education Savings Bond was released into the market, which helped people fund college. Any bonds purchased in or after 1990 to finance college tuition and expenses are tax-free. To determine whether you’re eligible for the Education Savings Bond Program, read What is the Education Savings Bond Program?

Further Reading

  • A model of US financial and nonfinancial economic behavior – www.jstor.org [PDF]
  • Hierarchical financial needs reflected by household financial asset shares – link.springer.com [PDF]
  • Financial literacy and retirement planning: New evidence from the Rand American Life Panel – papers.ssrn.com [PDF]
  • Financial intermediaries and monetary controls – academic.oup.com [PDF]
  • Financial literacy: an essential tool for informed consumer choice? – www.nber.org [PDF]
  • How ordinary consumers make complex economic decisions: Financial literacy and retirement readiness – www.worldscientific.com [PDF]