How Do Savings Bonds Work
Savings bonds are sold directly by the U.S. Department of Treasury through its website at TreasuryDirect.gov (NOT treasurydirect.com), and may be purchased in denominations of $50, $75, $100, $200, $500, $1,000, $5,000, and $10,000. These savings bonds are purchased at one-half of their face value. Thus, a $50 Series EE savings bond is sold for $25.
After 5 years, Series EE savings bonds can be redeemed at any time. Prior to 5 years, the bonds may be redeemed, but with a penalty of 3 months worth of interest. Up to $5,000 in savings bonds can be purchased per Social Security number in each calendar year.
Savings Bonds purchased prior to April 2005 earn an interest rate which is adjusted each May and November. However, all US Savings Bonds purchased after May 2005 have a fixed rate of interest for the life of the bond. The current interest rate for Series EE bonds is 0.70%.
In addition to its regular interest rate, Savings Bonds come with the interesting feature of being guaranteed to double after 20 years. In other words, the bond will be worth its face value no later than 20 years after purchase.
The Treasury offers many tools including a savings bond calculator and the means to replace lost or destroyed savings bonds via Treasury Direct.