Government Savings Bond

When investing for the future some will look to do the patriotic things and buy government savings bonds. Government savings bonds provide several advantages to the bond holder and to the country. Quite often the US government needs to generate cash flow for certain projects. One method of doing this is by selling government savings bonds.

The government savings bonds functions as an IOU. You purchase the bonds and agree not to cash it in until a certain date. In exchange you receive interest payments twice per years and compounded interest until the bond matures.

The bonds also receive the full backing of the US government. If the bond holder purchases a 1000 dollar bond they are guaranteed to at least regain their initial investment. However with compounded interest over the duration of he bond the holder should receive significantly more when they go to cash it in.

There are other advantages as well. Any interest payments that you receive are not subject to state or local taxes. If you are using the interest payment to fund college education you can even be exempt from paying federal taxes. The compounded interest is also tax sheltered until you go and cash in the bond.

There are 3 types of Government savings bonds. There are series I bonds, series EE bonds and series H bonds. Series I bonds were created in an attempt to get people to save. They pay interest twice per year and are adjusted for the cost of living. The series EE bonds are set at a fixed rate of interest. However they offer the option of tax deferment n the compounded interest until the date of maturity. Series HH bonds operate in a similar manner t series I bonds. The interest rate is adjustable according to the cost of living. Series HH bonds cannot be bought. They can only be purchased by exchanging EE bonds.

Savings bonds offer the holder a method of increasing their investment portfolio along with the security of government backing. They also offer the bond holder the knowledge that they are helping the country fund the projects that it needs.