savings bond investment & finance definition
A
contract representing a loan that an individual makes to the U.S. government.
The government repays the loan after a set period of time with a set interest
rate. Because savings bonds are backed by the full faith and credit of the U.S.
government, they are a safe way of saving. There are two types of savings
bonds: Series EE bonds are issued for 30 years and a bond’s value increases as
the interest earned is added to the principal; Series HH bonds are current
income securities issues for 20 years, which includes a 10-year original
maturity period and a 10-year extension.
See savings bond in Wall Street Words
A nonmarketable security issued by the U.S. Treasury in relatively small denominations for individual investors. Three categories of bonds are available. Interest on these bonds is exempt from state and local, but not federal, taxation. Also called
United States savings bond. See also
Series EE savings bond,
Series HH savings bond,
Series I savings bond.
Do U.S. savings bonds have a place in a portfolio?
Probably not, at least for most serious investors. Higher yields are available in various other government obligations that also offer marketability with no penalties if you want your money. TIP: For a beginning investor or for individuals of modest means, U.S. savings bonds are often a better investment than certificates of deposit, because taxes are not due until the bonds are redeemed.
Thomas J. McAllister, CFP, McAllister Financial Planning, Carmel, IN
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