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What are Savings Bonds? All You Need to Know

written by: Lucinda Watrous•edited by: Jason C. Chavis•updated: 5/22/2010

US Savings bonds are a great way to save money for the future. Take a look at this to find out more about savings bonds including, types, how to redeem them, and how you'll pay taxes on them.

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    What are Savings Bonds?

    Savings Bonds are a great way to save money regardless of the state of the economy. The money earns a percentage of interest for a period of time, and the rates change twice a year--in May and November. Current rates can be found by visiting the U.S. Treasury website. Bonds can be purchased in the following amounts: $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. Read Basic Information about US Savings Bonds if you want to find out more about how they work.

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    Types of Savings Bonds

    There are two different types of Savings Bonds: the I bond, and the EE Bond. Depending on the saving bonds purchased, investors will earn interest each month for a period of time, up to 30 years.

    If you're having trouble deciding which kind you should purchase, take a look at What is the Difference Between EE and I Savings Bonds? This should clear up any confusion you have and help you determine what you want to invest in.

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    Taxes on Savings Bonds

    You will be responsible for paying taxes on the interest earned each year. You need to take great care to report all of this information to the IRS because you risk audit and legal trouble if you do not report this on your tax return. Read Paying Taxes on Savings Bonds to help you understand more about how you should report this income.

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    Handling Unclaimed Savings Bonds

    If you believe you have an unclaimed savings bond, you will need to follow protocol in order to reclaim the funds. You may have lost the bond or inherited a bond from a relative; it's always a good idea to check and make sure there are no unclaimed funds in your name. If you ever become an executor of a will, you may have to help handle them as well.

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    Cashing in Savings Bonds

    It's not as simple as buying a savings bond and then cashing it in. There are certain rules that must be followed in order to reedem them. If you have a one that is ready to cash in and you need more information, check out: Redeeming Savings Bonds to find out the necessary steps you should follow. Remember, you must wait at least a year from the date of purchase before you can cash in.