US savings bonds are the savings bonds that are backed by US Government, which means they are issued by the US Treasury. Thus, US Savings Bonds are considered as reliable and low-risk security products for use towards almost any type of financing.
You can buy US Savings Bonds for financing your education, for providing you with alternative retirement income, as graduation or birthday gifts, in addition to other purposes. Even though good interest rates are offered by banks, but indeed these are not actually that high-yielding; when you take into account inflation, term, and future value of your current principal.
This is where the US Savings Bonds become a very good option for those who are still starting to save; since it is issued and guaranteed by the US Treasury, it becomes an responsibility of the US government, and not just any private institution.
The US Savings Bonds are exempted from State and local income taxes. US Savings Bonds cannot be negotiated, and but they are transferable with limitations and tax consequences. You can purchase the US Savings Bonds and can also redeem them.
You can do the purchases and redemptions of US Savings Bonds from agents that act on behalf of the US Treasury like commercial banks and even company-employers. You can also purchase them online from the Treasury's site, and can also be redeemed directly from a Federal Reserve Bank branch.
The registration of US Savings Bonds can be done through different types of accounts; it can be through single ownership, co-ownership, or beneficiary. Just ensure you know which is best for you.
If you choose for co-ownership, in such case either of you can do whatever you want in your US Savings Bonds, it doesn't require the consent of both parties, and if either of you will die then the surviving owner automatically gets everything.
If you prefer the beneficiary account and you're the primary account holder, you then have total control of the bond, only after your death, the ownership and responsibility will be transferred to the beneficiary.
Kinds of US Savings Bond
At present, US Treasury issues the two kinds of US savings bond. Paper EE bonds are the first kind of US Savings Bonds. You can purchase these Paper EE bonds in most financial institutions, local or otherwise. They can also be purchased through the payroll deduction plan of a participating employer.
Electronic EE bond is another type of US Savings Bond. You can do the purchases and redemptions of the electronic EE bond through a personal Treasury Direct account to ensure the utmost security and safety.
Advantages and Disadvantages of Each Type
There are some advantages or disadvantages of purchasing either type of US savings bonds. One distinct advantage of paper EE bonds over their electronic counterpart is that they are of lower purchase prices.
You can purchase paper US savings bond at half the price of their face value. Thus, you need to pay only $25 if you purchased a $50 bond. However, there is a disadvantage to this: until the bond gets matured, it will not be worth its face value. In other words, you basically get what you pay for at the time of the purchase.
This is the case with electronic US savings bonds. You will get what you've been aiming for in the first place since electronic EE bonds are sold at face value. So, for example, you need to pay $50, if you bought a $50 bond and there is no more waiting time required in order for the bond to mature.
In other words, the electronic US savings bond is worth its full value upon its availability for redemption.
Denominations
Electronic EE bonds can be purchased in amounts starting from $25 up to any amount and to the penny. Yet, there is a limitation on the amount of US savings bond you can buy within one calendar year. A person can purchase up to a maximum value of $30,000 and any purchase amounting to beyond that amount in one calendar year will be dishonored.
Paper EE bonds are dissimilar. These US savings bonds are available in a set similar to real money, as they are issued as paper bond certificates. A person can purchase a paper US savings bond in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000.
Interest on the US savings bond will accrue once you purchase them, or once they mature in the case of paper bonds. However, you will not be entitled to the interest of the 3 most recent if you redeem the bonds in the first 5 years.
It is certainly a good way to start letting your money work for you by investing small monthly amounts in US Savings Bonds.
US Savings Bonds is a very good long-term investment, even though you may decide to hold on to it for a year or a few years, you can in fact maximize your money's worth and its potential if you hold on to it for the next decade or so, just in time for your kids to grow up and use it for college.
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