Savings bond is the most common investment. It is a treasury security for investors. These bonds are generally given to us as gifts. What happens is investors’ loan money to the government and the government does not owe that money until 30 years since date bought. Basically, bonds are notes in the form of money issued by the government that can’t be traded.They can be redeemed only after a year. Here the interest payments are added simply on to the savings bond value. Since it is a tax-deferred item, the interest need not be reported to the government until the bonds are cashed.
Bond value varies according to type of bond purchased – series A, B, C, D, E, F, G, H, I, J and K. The value also depends on the time when the bond is cashed and the kind of interest assigned to it. The bonds are available in amounts between $ 50- $10,000. And they have a maturity date between eight to thirty years. However, if they are penalized with three months’ worth of interest if one cashes in before five years.
While buying a savings bond, one pays 1/2 of the worth and after 30 years, the bond is worth twice the money paid because over the time the interest adds up and reaches the bong value. Saving Bond value can be calculated by noting the face value of the bond, its rate of interest since the bond was issued till the present time and penalties, if any. Also, it should be noted that a bond issued at half the face value will be worth the face value at maturity, while the one that is issued at face value is worth twice the amount at the time of maturity.
Bond value is worth much more than its actual value. However, investing money for thirty years is a long time, but youngsters should always invest their saved money instead of spending. If one needs to en-cash a savings bond before the thirty years, he may not be provided full face value, still one will earn the money invested along with the! interes t over that period of time. Thus, these bonds are debts to the government as they have to pay back the value of the bond when the time is up and can be considered s safe investment.
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