A United States savings bond is a type of security issued by the federal government for investors. Savings bonds are actually loans, when you buy a United States savings bond, you are loaning your money to the federal government. After the loan matures, the government pays you back double of what you paid for the bond, plus interest. If you buy a paper $50 Series EE bond, you will pay $25 for it. In 20 years the bond matures and is worth $50. That bond can earn interest for 10 more years, so in 30 years you have more than doubled your investment. You can buy a United States savings bond for as little as $25. You pay face value for the bond when you buy online, and at maturity the bond doubles in value and can earn interest for another 10 years.
The Series I bond is protected against inflation, so that your investment won't be affected by inflation. I bonds are a better investment than a money market investment. Money market CDs only earn about 1.5 percent interest, and I bonds earn about 3.39 percent interest. If you are going to tie up your money for a period of years in an investment, you should choose an investment that will pay you the most. Series I and EE bonds are both very good investments.
To have better bond yields over time, many investors use bond ladders. Bond laddering is a strategy that works well with big investors. The investors invest in a portfolio of bonds that have staggering maturities. There is an annual limit of $10,000 you can spend on each type of savings bond. However, you can buy $10,000 in paper bonds, and $10,000 in electronic bonds. For instance, if you want to invest $20,000 into Series I bonds, you would be better served to invest in smaller blocks of bonds. For instance, you might want to stagger 20 blocks of $1,000 I bonds that mature at different times. You can do the same with Series EE bonds. There is no limit to how many bonds you can purchase over time, but you are limited to a combined $20,000 per calendar year of paper bonds and electronic bonds. Over the years you can accumulate hundreds of thousands of dollars in United States savings bonds. Bonds are a great investment because they are 100 percent safe, and earn more than money market investments.