Unlike the other types of Treasury securities, savings bonds can be owned by kids. Also, savings bonds are non-marketable, which means they are registered to a specific owner and cannot be bought and sold to other people in the "secondary market" by brokers and dealers. Paper savings bonds used to be bought in different denominations. Bonds were available with a face value of $25, $50, $75, $100, $200, $500, $1000, $5000 and $10,000. You could buy them from most commercial banks in paper form or directly from the Treasury Department in electronic form. Savings bonds that are electronic can be bought for as little as $25 or any amount up to $5000 and held in a secure TreasuryDirect® account.
Since January 1, 2012, paper savings bonds are no longer available at banks or other financial institutions. Paper Series I bonds can still be bought with IRS tax refunds, but Series EE bonds are available only in electronic form.
There are two types of savings bonds currently available.
- Series EE bonds
- will pay a fixed (or set) interest rate
- are available as electronic bonds
- earn interest each month
- are guaranteed to at least double in value in 20 years
- earn interest for 30 years
When you used to buy a paper Series EE bond, you paid half the face value for the bond. Now, you pay the total face value for electronic EE bonds. At the end of the savings bond's term, you cash it in. Regardless if you paid half or total face value, you will get the face value plus the interest that has built up over the years. You can cash in your bond after one year from buying it and get back the money you paid for it. You will not get all the interest that has built up if you cash in a savings bond before it is five years old.
- Series I bonds
- Paper (through IRS tax refunds) and electronic bonds are sold at face value
- can be cashed in after one year from buying it for the amount you paid for it (but you won’t get all the interest that has built up if you cash in a Series I bond before it is five years old)
- earn interest for 30 years
The Series I bond has two interest rates. One is a fixed rate that is set when you buy your bond. The other rate is connected to the inflation rate (a rise in the prices you pay for the things you buy). If there is inflation, the interest rate goes up. If prices are falling, called “deflation,” the interest rate goes down.
FAQs
How to get the most value from your savings bonds
| Face Value | Purchase Amount | 20-Year Value (Purchased May 2000) |
|---|
| $50 Bond | $100 | $109.52 |
| $100 Bond | $200 | $219.04 |
| $500 Bond | $400 | $547.60 |
| $1,000 Bond | $800 | $1,095.20 |
The bonds have a set interest rate (also known as a fixed rate). You receive interest from the Government every six months. When you reach the end of the bond's term, the Government pays you the full total value or "face value" of the bond.
Are Treasury bonds a good investment for kids? ›
Bonds can be a good way to help kids save for future expenses. They are guaranteed not to lose value and are intended to keep pace with inflation. Money from I bonds can come in handy as kids enter adulthood and look to make major purchases.
What are Treasury securities in simple terms? ›
Treasury securities—including Treasury bills, notes, and bonds—are debt obligations issued by the U.S. Department of the Treasury. Treasury securities are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.
Do savings bonds double every 7 years? ›
Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.
How long does it take for a $1 000 dollar savings bond to mature? ›
They're available to be cashed in after a single year, though there's a penalty for cashing them in within the first five years. Otherwise, you can keep savings bonds until they fully mature, which is generally 30 years.
What is one downside to investing in treasuries? ›
Cons of Investing in Treasury Bonds
Interest rate risk: As interest rates ascend, the value of existing bonds with lower interest rates tends to diminish, potentially leading to capital losses if the bonds are sold prior to maturity.
How do Treasury bonds work for dummies? ›
We sell Treasury Bonds for a term of either 20 or 30 years. Bonds pay a fixed rate of interest every six months until they mature. You can hold a bond until it matures or sell it before it matures.
How much do you make on a 3 month T bill? ›
3 Month Treasury Bill Rate is at 5.25%, compared to 5.25% the previous market day and 5.12% last year. This is higher than the long term average of 4.19%. The 3 Month Treasury Bill Rate is the yield received for investing in a government issued treasury security that has a maturity of 3 months.
What is the downside to buying Treasury bonds? ›
These are U.S. government bonds that offer a unique combination of safety and steady income. But while they are lauded for their security and reliability, potential drawbacks such as interest rate risk, low returns and inflation risk must be carefully considered.
I bonds can be good investments for parents or grandparents who are looking to save money for their children and grandchildren. First, I bonds can be a steadier and more predictable investment than the stock market — it's redemption value will not decline because it is backed by the U.S. government.
Do kids have to pay taxes on savings bond interest? ›
Reporting the interest every year
For example, you may find it advantageous to report interest every year on savings bonds in a child's name. The child may be paying taxes at a lower rate than will be true years later when the bond matures.
How often do 2 year treasury notes pay interest? ›
We sell Treasury Notes for a term of 2, 3, 5, 7, or 10 years. Notes pay a fixed rate of interest every six months until they mature. You can hold a note until it matures or sell it before it matures.
How risky are Treasury securities? ›
They offer a fixed interest rate and are backed by the U.S. government, making them a low-risk investment. While they may not yield the highest returns compared to riskier investments, they can provide stability to your portfolio, particularly during times of market volatility.
Should I buy 10 year Treasury bonds? ›
Whether 10-year Treasurys are a good investment for you depends on your investment goal. If your goal is to let your money grow slowly and conservatively over time, Treasury notes are considered a low-risk investment if held to maturity since they're backed by the U.S. government.
How long does it take for a $100.00 bond to mature? ›
U.S. Savings Bonds mature after 20 or 30 years, depending on the type of bond: Series EE bonds mature after 20 years. They are sold at half their face value and are worth their full value at maturity. Series I bonds are sold at face value and mature after 30 years.
Do savings bonds double in 20 years? ›
EE bonds earn a fixed rate of interest, but, regardless of the rate, they are guaranteed to double in value if you hold them 20 years.
Do I bonds double in 20 years? ›
Both share similar tax considerations, providing federal tax deferral and state and local tax exemption. The fundamental difference between them is the variable inflation interest rate offered by I bonds and the guaranteed 20 year doubling for EE bonds.
What is the return on bonds for the last 20 years? ›
Average Treasury Bond Yield – Between 3% and 4%
If you purchase a 10-year Treasury at time of writing, you could expect a yield of about 4.45%. Based on yields over the past 20 years, you can expect average interest payments of between 3% and 4%.
