What you need to know about savings bonds.

Planning for the future is one of the most empowering steps you can take for your financial well-being. Whether you want to build a safety net, fund a child’s education, or set aside money for a major milestone, having reliable tools makes all the difference. 

You might have heard people mention government bonds as a secure way to grow your money. The real question is, what is a savings bond? In this article, we’ll explore savings bonds, what they are, and how you can ultimately redeem them to fund your future goals!

What is a savings bond?

A savings bond is a debt security issued by the government. When you buy one, you’re essentially lending your money to the government. In return, they promise to pay you back the original investment along with a set amount of interest over time. 

If you’re 18 or older and have a valid Social Security number, a U.S. bank account, and a U.S. address, you can easily purchase savings bonds to support your financial goals. You have the flexibility to cash them in after just one year, though keep in mind that there’s a penalty for redeeming them within the first five years. 

Otherwise, you can hold on to your bonds while they grow until they reach full maturity at 30 years. Please note that while you can only purchase electronic bonds today, you can still easily cash in any paper bonds you might already own.

Where can I get a savings bond?

Most people purchase savings bonds online through the U.S. Department of the Treasury’s secure website, TreasuryDirect.gov. This accessible and convenient platform lets you buy, track, and manage your bonds from the comfort of home.

If you have a special occasion coming up, like the birth of a child or a graduation, you can also give savings bonds as gifts. Please note that as of January 1, 2025, you can no longer buy paper savings bonds, including through your federal tax refund. All new savings bonds are exclusively issued electronically.

What are the common types of savings bonds?

As you explore your options, you’ll generally encounter two main varieties: 

1.    Series EE bonds

Series EE bonds offer a fixed rate of interest for the life of the bond. The government guarantees that your investment will double in value if you hold it for 20 years. This makes Series EE bonds a wonderful option if you love predictability and want to know exactly what your money will do over the next two decades.

2.    Series I bonds

Series I bonds help protect your savings from inflation. They earn interest based on a combination of a fixed rate and an inflation rate, which the government adjusts twice a year. If you want to ensure your purchasing power remains strong even when the cost of living goes up, Series I bonds provide a fantastic layer of security.

How to cash in a savings bond?

When you’re ready to put your savings to good use, cashing in your savings bond is a simple process. If you hold electronic savings bonds, you can log in to your TreasuryDirect account, select the bond you’d like to cash in, and follow the secure steps to transfer the funds straight to your bank account. 

For those with older, paper savings bonds, most local financial institutions can help you redeem them in person. Here are some things to know and consider before cashing in your savings bond:

• Call ahead and confirm that your branch cashes bonds and ask about daily limits.
• Bring the physical bonds and a photo ID.
• Use the Savings Bond Calculator to check their current value. Bonds from the 1990s have likely reached their 30-year maturity, meaning they stopped earning interest.
• Savings bond interest is subject to federal income tax, but exempt from state and local taxes. The financial institution will provide a 1099-INT form.

Planning for the future with a savings bond

Building a brighter financial future starts with understanding your choices. Learning what is a savings bond can empower you to take the next step with confidence. As you explore your savings options, knowing how to cash in a savings bond ensures you’ll always feel in control when it’s time to use your hard-earned funds.