What Are Savings Bonds?

Savings bonds are low-risk savings tools. Your returns are based on how long you maintain the bond, the current interest rate, and the type of bond you purchase. Savings bonds come in two forms Series EE and Series I, and can be gifted to help others begin saving. To find out which bond may fit your financial situation, let's examine how savings bonds could be used for long-term financial planning.


Image of savings bonds

Series EE and Series I


When purchasing Series EE bonds and Series I bonds, the length of time you want to maintain the bond should be considered. Series EE bonds take longer to fully mature than Series I bonds. Series EE bonds are considered long-term bonds and earn interest for 30 years or until you cash them. The interest rate for a Series EE bond is significantly lower than that of a Series I bond. However, after 20 years, your Series EE bond will be worth double what you paid for it.


Series I bonds earn an interest rate based on inflation and would be best suited for someone seeking to make a short-term investment. However, you can continue earning interest on a Series I bond for at least 30 years. In October 2021, the current rate for a Series I bond is 3.54 percent compared to a Series EE bonds rate of 0.10%.


Bond Volatility


Savings bonds are considered to be low-risk assets. Savings bonds receive gradual interest rate increases. The value of bonds also does not depreciate, and the government backs the value. One risk is that interest rates may decrease based on how the economy is performing. This is an essential factor for Series I bonds if you want to use them for short-term growth.



Buying Bonds


You can purchase savings bonds by visiting the Treasury Direct website at any time or during tax season when you file your tax return. Buying bonds in electronic format can be beneficial and secure. Paper bonds can be stolen, lost, and difficult to obtain if you do not know the serial number. TreasuryDirect no longer issues Series EE bonds in paper format. This is beneficial because electronic bonds provide you with the ability to periodically check on the interest and growth rate of your bonds in a secure environment. In addition, if you have a beneficiary change to your bonds, it can be changed online in a matter of minutes with electronic bonds.


See Tools To Teach Your Kids About Saving, Debt, Bonds, and More - TreasuryDirect Kids


Bonds For Long-Term Use


Savings bonds should fit into a long-term savings plan determining on the type. Series EE bonds can be used for retirement purposes, your children's college funds, or even future mortgage payoffs. Series EE bonds mature over 30 years and could fit into your long-term financial plans and eliminate any losses on the interest you gain due to early withdrawals. It's essential to weigh your options when considering Series EE or Series I bonds and consult with a certified financial advisor who can recommend options based on your particular financial situation.

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