Savings Bond Plan

  

Categories: Bonds

Back in the day, this was your grandmother's preferred birthday present to you. She'd pay $19 for a $25 savings bond that matured in a decade. And no, she never paid attention to the extremely low interest rate she was getting on her money.

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 '69 Barracuda), you receive the face value (they're usually sold with a $500 face value), plus all that accrued interest. And it ain't much.

Thanks, Grandma. You coulda bought a few shares of Exxon instead.

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Finance: What is a Savings Bond?2 Views

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finance a la Shmoop what is a savings bond well it's kind of like charity

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charity because interest rates on savings bonds are exceptionally low even

00:13

by government standards well there was an era in America when taxpayers happily

00:18

and willingly loaned money to Uncle Sam and were happy to do so because they had

00:23

great faith and trust that the people we elected were in fact decent honest [old government photos]

00:28

hard-working representatives who had the interests of the nation placed far ahead

00:34

of their own personal gain it was the era of Jimmy Stewart and a whole bunch [photo of Jimmy Stewart]

00:38

of others you should think the greatest generation yeah we know even a pretty [picture of John Wayne]

00:44

good generation check Congress for details so savings bonds used to be a

00:48

standard birthday present for young people kind of like the cross pin that [kid's birthday party]

00:53

nice Jewish boys would get at their bar mitzvahs grandmother's after slathering [boy's mar mitzvah]

00:57

in a bathtub of angry perfume loved handing the $50 savings bond envelope to [woman in hot bath]

01:03

their college-bound progeny well savings bonds are issued by the US

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Treasury and have no stated maturity date instead what happens is that the

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savings bond welljust pays the interest for some

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period of time like say a decade and at the end of that 10 years while it simply

01:18

stops paying interest you can cash in the bond at that time or just let it

01:23

ride essentially renting money to the Gov for free and yeah you don't want to

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confuse a savings bond with this bond yeah who needs no safety

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