Over 700 finance terms, Shmooped to perfection.
Back in the day, this was your grandmother's preferred birthday present to you. Savings bonds are issued by the Treasury and are a simple and cheap way of lending to Uncle Sam. There is no stated maturity date, but interest would be paid for a certain period. After that period ends, the bonds no longer pay interest. Also, interest isn't paid each year; instead, it's tacked on to the existing principal, so when you cash it in for college (or that bitchin' '69 Barracuda), you receive the face value (they're usually sold with a $500 face value) plus all that accrued interest.