What Are Savings Bonds?
Savings bonds are a great option for goal-oriented and long-term savers. Sometimes called fixed rate bonds, savings bonds allow savers to gain interest on the principal amount paid for the bond. Usually, the longer someone keeps the savings bond the more interest they will earn.
Many people believe that they must keep the savings bond for decades in order for it to be worth something, but this is not the case. Savings bonds can grow in much shorter intervals, even growing in as little as six months, still earning more interest than a typical savings account and proving to be a good way to generate passive income.
The most common form of savings bonds are those kept for one to five years. With one of these bonds, when you try to sell before it matures you may end up losing money, which is why it’s best to allow the bond to grow for the entire agreed-upon term. Additionally, savings bonds are each given a registration number, so if you misplace the bond, you can still claim the funds or get a replacement bond.
Getting Started with Savings Bonds
Another feature of savings bonds is that they don’t require a huge deposit to get started. Even with as little as $25 you can purchase a savings bond. The interest earned on the bond is generally exempt from local or state taxes, making this a great choice for savers who want to grow their money without depleting growth with taxes. There are also no age limits for bond purchases, so even retirees can diversify their retirement savings with low-risk savings bonds.
To find out how a savings bond can fit in your overall financial plan, you should speak with a savings professional. This way you can learn about all the different available options and make the best choice for you and your family.