Whatever happened to savings bonds?

by Emaryi Williams –

(Photo: Adobe Stock)

According to AARP, savings bonds were really popular gifts “back in the day”, especially among grandparents. Savings bonds date back to 1935 when former president Franklin D. Roosevelt signed into legislation that the U.S. Department of the Treasury could sell them as a new type of security.

According to Treasury Directs, when you buy a savings bond you’re essentially “lend[ing] money to the U.S. government. In turn, the government agrees to pay that much money back later — plus additional money (interest).” The interest can only be earned for up to 30 years, and it can also be federally taxed.

There are three main types of savings bonds in the United States:

  1. Series E — These types of bonds were created in 1981 to help fund World War II. As of 1980, they are no longer being sold. While these would be out of date, they are still redeemable.
  2. Series EE — These bonds were created in 1990 to replace the Series E bond and were used as a way to help save and pay for college. These bonds earn different interest rates based off of when they were issued.
  3. Series I — These bonds were created in 1998 to help Americans save while protecting them against inflation. These bonds have a combination of a fixed rate and a semiannual inflation rate that reflects the consumer price index.

Now that you know the difference between savings bonds, you may still be wondering where they went, and why you may not see them anymore.

The answer is simple. They went online.

As of 2012, savings bonds were no longer printed on pieces of paper. To both purchase and redeem an online savings bond, you must go through Treasury Direct, which is maintained by the U.S. Treasury. The move to online was made to make bond purchases easier and more accessible using the internet.

Despite paper bonds being discontinued, you can still cash in paper bonds. You can even convert your paper bond into an electric one on Treasury Direct’s website, letting it mature longer online. According to Investopedia, another pro to switching to electronic bonds is that when you want to cash out an electronic bond, you can choose to only take a portion and keep the rest maturing. You cannot do that with a paper bond.

Rules about interest and taxes are still the same for both paper and electronic savings bonds, and they can be found on Treasury Direct’s website. There is also a tool available to help bondholders determine what their bond may be worth today.

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