Cash Savings Bonds

Many of us received cash savings bonds when we were younger. It may have been a favourite uncle who gave you one to reward you for your good grades or it may have been that you won some in a competition.

There was a good reason they were so popular back then. It's because they represented a good investment. In fact, they still do.

Savings bonds are a government instrument, issued as savings certificates to individual investors in small amounts. They can range from $50 right up to $10,000.

Because they are backed by the government, they are among the safest investments you can make. Can you imagine the government defaulting on a loan? I didn't think so.

This even applies if you lost your savings bond certificate. As long as you can provide such information as the serial number, issue date and the address and social security number of the owner, your cash savings bond can still be redeemed.

This isn't the only advantage of cash savings bonds. Unlike other investments, you don't need a large amount of initial capital. You can buy bonds for as low as $25.

They can also provide a tax shelter. You don't pay income tax on the earnings of many cash savings bonds until you redeem them.

Because they are so popular with investors, cash savings bonds are now on sale in a wide variety of places. You can buy them in banks, credit unions and you can even invest in them through payroll deduction plans at work.

So, what's the drawback? The only drawback is that because savings bonds are so safe, they offer a relatively low rate of return. However, it can be a case of slow and steady wins the race. In these times of financial upheaval, a constant rate of return - low though it may be - is better than no return at all.

This return will continue until you decide to redeem your bonds. This is a straightforward process which can be done at your local financial institution. Bring your driver's licence or other form of identification along with you and you will be allowed to redeem your bonds for their full value, unless you have held them for less than five years. In this case, there may be a penalty to pay.