Savings Bonds

By Eric Teall

What is a Savings Bond?

• Savings Bonds are issued by the us government to help control the economy.

• They are considered one of the lowest risk ways to make money, because as long as there is a U.S. Government, you can turn in a savings bond.

How they work

In recessions, the federal reserve will buy bonds from the public at increased rates.– This brings more money into the hands of the

community and stimulates the economy.In situations of high inflation, the federal reserve

will begin selling bonds.– These bonds will remove money from the economy,

as the consumers cannot buy items with the money they put in, thus lowering prices and inflation rates

How to buy a savings bond

• Any U.S. Citizen above the age of 18 can buy a savings bond

• How to get one – you must have an account at TreasuryDirect.gov or visit a

bank or some other financial institution.• After choosing which form you wish, the applicant must fill out

the required form and provide their social security number.

• You have to wait 1 year to redeem a savings bond, but if you redeem it before maturity, you will loose three months of accumulated interest.

What does maturity mean?

• Maturity means that a bond has run its course, and has gained interest over its lifetime.

• It is possible to check how long till it matures by reading the paper slip, or by visiting the treasurydirect.gov account created for the use of an electronic bond.

What are the costs of Savings Bonds?

• There are few costs of savings bonds, but mainly the ones a purchaser has to worry about are.

• Low interest rates• Low fluidity • Penalties if removed early• International band of terrorists overthrowing the us

government but leaving every other economic stronghold in place.

Types of Savings Bonds

• Treasury Bonds– Earns interest at a fixed rate– Matures in 30 years

• Treasury notes– Earn interest at a fixed rate– Matures within 2, 3, 5, 7, and 10 years.

• Treasury Bills– Sold below face value (Or what it says it costs)– Matures within days to 52 weeks at face value

Types of Savings Bonds

• Treasury Inflation Protected Securities (T.I.P.S.)– Interest is fixed, but is added to the current

market rate of inflation. • For example, if the inflation rate is 3% and the interest

rate is 2%, the tip would gain 5% interest.

Rates on savings bonds

• Rates of interest are higher when the economy is good, and lower when the economy is doing poorly.

• The current rate on savings bonds are at .74 percent. – This is a good investment if you need to make

about a dollar in a few years.

Interesting facts.

• Treasury and savings bonds were created in world war 1, originally called liberty bonds.

• Despite fears of growing foreign debts, the us treasury cashes in more citizen bonds in one day than any other foreign power currently owns.

Quiz Time

• Is it a good idea to buy bonds during a recession?

• Are bonds considered a safe investment?• TIPS are set only gain interest at the rate of

inflation.• Most bonds can be cashed in at anytime for

no penalty, true or false.

New information!

• You can cash a savings bond the same way you cash a check.

• If you cannot confirm a social security number, you can use your own.

• It is possible to convert a paper bond into an electronic bond, by going into treasurydirect.gov and creating a conversion account, and filling in the information You cannot re convert it into a paper bond

• Savings bonds are not insured, because they are fully backed by the US government. They cannot fail.