Course 110: U.S. Savings Bonds
What Are Savings Bonds?
In this course
1 Introduction
2 What Are Savings Bonds?
3 Where Can You Buy Savings Bonds?
4 What Types of Savings Bonds Are Available?
5 How Much Money Do Savings Bonds Earn?
6 How Do You Redeem Savings Bonds?
7 What Taxes Apply to Earnings from Savings Bonds?
8 Savings Bonds Have Been American Favorites for Decades

Occasionally, you may come across an old movie or poster that portrays a World War II bond drive or urges citizens to "Buy bonds!" The United States established savings bonds, known then as "war bonds," in 1941 to help pay for the huge expenses it would incur during World War II. Today, savings bonds still help keep the government wheels running smoothly.

Savings bonds are a debt instrument of the U.S. government, issued as savings certificates to individual investors in small amounts. Savings bond certificates bear face value denominations ranging from $50 to $10,000.

Since they are backed by the full faith and credit of the federal government, savings bonds are among the safest investments you can find. The U.S. government is unlikely to default; and even if you lose your savings bond certificate, the government will often replace it--especially if you can provide such information as the serial number, issuance date, and address and Social Security number of the owner.

Another major advantage of savings bonds is that they are an accessible investment for almost anyone, since you can buy savings bonds in amounts as low as $25. For instance, you can buy a $50 Series EE bond for $25, and at maturity, you can redeem it for $50. As a result, savings bonds still make good gifts for children planning to attend a college or technical school.

That's not all. Savings bonds have at least two more advantages. They can provide a tax shelter--you don't pay income tax on the earnings of Series EE bonds until you redeem them. In addition, savings bonds are easy to acquire from a variety of sources.

Besides offering several tax advantages, savings bonds can provide a reasonable, inflation-indexed return and a steady investment vehicle for the long term--not to mention the safety and backing of a U.S. government-issued security.

Next: Where Can You Buy Savings Bonds? >>

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