What is a U.S. Savings Bond?

A United States savings bond is a bond or debt security offered by the government to settle the borrowing needs of the government. U.S savings bonds are quite attractive and safe investments because they have fixed interest rates that mature at a fixed time. These savings bonds are also not taxable, either by state authorities or local authorities. Individuals purchase the United States Saving Bonds to enroll into specific government programs and projects that serve as fundraising scheme by the U.S government. The United States Department of the Treasury issue U.S saving bonds to individuals who show interest in them.

How Does a U.S. Savings Bond Work?

The United States savings bond is a form of bond known as debt security that is only issued by a government-owned agency i n the U.S. he United States Department of the Treasury is an executive department that manages all the revenue of the U.S. This department offers saving bonds to the public so that funds can be raised for governmental projects and activities. When the U.S savings bonds are issued, they serve as a means of taking loan from the public, the bonds however have fixed interest rates and are to be collected at fixed periods. The U.S savings bonds when they were first issued were meant to finance a significant period, this was the period before World War II. Due to the purpose of these bonds at that time, they were called defensive bonds. The history of the United States savings bond can be traced back to February 1935, when the president at that time, President Franklin D. Roosevelt signed a legislation that enabled the Department of Treasury to issue the U.S saving bonds. The bonds were also called War Savings Bonds at that time because, funds from the bonds were invested into war effort. The purchase of these savings bonds have guaranteed returns that individuals who purchase them enjoy.

Features of U.S. Savings Bonds

1. The U.S savings bonds cannot be transferred or negotiated. Individuals are expected to purchase the bonds directly from the government and not resell or market them to other persons. Non-marketability is a major feature of the U.S savings bonds.
2. The bond does not fluctuate in value. Because there are no middle-men in the sales and purchase on these saving bonds, their values are maintained since they are registered with the government.
3. Interest payment: interest are not paid on U.S savings bonds until their maturity dates. Redemption or maturity of bonds qualify them for interests.
4. Purchase: An investor can buy more than $10,000 par value of the bonds in a year. The minimum investment value is $25 while the maximum value is $10,000.
5. Taxation: only federal taxes can be applied to the U.S savings bonds, the bonds are exempted from state or local taxes.
6. Redemption and Maturity: maturity of a bond can take between 15 and 30 years. For redemption, after 12 months of initial purchase, redemption can be made. Redemption within the first five years of purchase can lead to forfeiture of the last three months interest as a penalty but redemption after five years has no penalty.

Types of U.S. Savings Bonds

There are two types of U.S savings bonds offered by the U.S government, these bonds can be purchased in banks, financial institutions, on the Department of Treasury's website and electronically;

• Series EE savings bonds: this type of bonds are sold par value but the full value is reached upon redemption. The can also double in value over the purchase price (face value) when they mature 20 years from issuance. The Series EE bonds are replacement for the 1980 Series E bond.
• Series I U.S. Savings Bond: this bond is also sold at face value, it was introduced in 1998. Its interest rates are flexible and can be affected by inflation.

Official residents of the U.S, citizens, government employees and other qualified individuals can purchase a U.S savings bond. Saving bonds are issued by the government and are risk-free. They serve as a means through which the U.S government get public loans for capital projects. They are also profitable investments for individuals due to their fixed interest rates.