Savings bonds

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Savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government’s borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.[1]


On February 1, 1935, President Franklin D. Roosevelt signed legislation that allowed the U.S. Department of the Treasury to sell a new type of security, thus the Savings Bond was born. One month later, the first Series A Savings Bond proceeded to be issued with a face value of $25. At first[when?], the main purpose was to help finance World War II, these were referred to as Defensive Bonds. On April 30, 1941 Roosevelt purchased the first bond from Treasury Secretary Henry Morgenthau. The next day, they were made available to the public. After the attack on Pearl Harbor, Defensive Bonds were informally known as War Savings Bonds, citizens could buy the bonds for a dime. All the revenue coming in from the bonds, went directly to support the war. Even after the war ended, Savings Bonds became popular with families. Unlike before, people started to just wait to cash them so the bonds would grow in value. To help sustain post-war sales, they were advertised on television, films, and commercials. Even when John F. Kennedy was president, he encouraged Americans to purchase them, which stimulated a large enrollment in Savings Bonds. By 1976, President Ford helped celebrate the 35th anniversary of the U.S. Savings Bond Program. The film, "An American Partnership" honored the role of citizens in financing the nation's growth. In 1990, Congress created the Education Savings Bond program which helped Americans finance a college education. A bond purchased on or after January 1, 1990, is tax-free if used to pay tuition and fees at an eligible institution.

In 2002, the U.S Department of the Treasury's Bureau of Public Debt made Savings Bonds available for purchasing and redeeming online. Finally, on January 1, 2012 banks and other financial institutions terminated their sales of bonds. Currently, Americans can only buy U.S. Savings Bonds online at

General information[edit]

Savings Bonds come in eight values: $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. After purchase, the holder must wait at least six months before cashing it in, when they will receive the capital plus some interest. The maturity periods can vary. For example, if you buy a bond with a value of $50 for $25, you'll have to wait at least 17 years to get back your investment from the government. Though you are able to wait as long as you want to get your money back, the longer you wait, the greater interest you earn. Savings Bonds are protected because they are secured by the U.S. government. The principal and earned interest are registered with the Treasury Department, so if a bond is lost, stolen, or destroyed they can be replaced at no cost. Savings bonds can also have value as a collectible since the government stopped issuing them in paper form.


Bonds require the purchaser to have a Treasury Direct account, which requires a social security number, a driver's license, a checking or savings account, and an email address. The purchaser can select the owner of the security, and the amount of the Savings Bond ($50, $100, $500, etc.) After submitting an order, a message confirms the money will be taken out of the account within one day. A record of the Savings Bond purchase is placed in the purchasers account, as paper bonds are not issued.


•Minimum Purchase: $25

•Maximum Purchase: $30,000 per person per year

•Interest: 90% of 6-month average of 5-year Treasury security yields, added monthly and paid when the bond is cashed

•Minimum Term Of Ownership: 12 months

•Early Redemption Penalty: Forfeit three most recent months' if cashed before 5 years


Bortz, D. (n.d.). Bye, bye paper savings bonds. In Personal Finance. (Reprinted from U.S. News & World Report, 40(8), 128, 2011, September)

This article by Daniel Bortz, a graduate from Syracuse University, and editor of personal finance stories for U.S. News & World Report, clearly expresses the new and improved way to purchase savings bonds as well as accurate and helpful statistics on the matter. It also provides direct quotes from financial planner Kay Coheady which support his facts.

Code of Federal Regulations (CFR) Department Circulars, 31 C.F.R. § 353 (2012).

This U.S. Regulation, tells you what you can and cannot do concerning savings bonds. It provides the rules, and what can happen if someone were to break those rules. It also provides very long sections of clear cut information so it will not be hard to misinterpret or misunderstand something, everything is very clear.

Miller, T. (2003). Kiplinger's Practical Guide To Your Money. Washington DC, US: Kiplinger Washington Editors Inc.

This book by Ted Miller, who is the editor of Kiplinger's Personal Finance Magazine, provides readers of any age with useful information and guidance on personal financial planning and money management. This also includes a section on savings bonds with detailed information. It specifically talks about why someone should purchase savings bonds, where to buy them, how much they can escalate in value, and how much it costs to buy one. ISBN 141951752X

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