What is the Savings Bonds? Lots of people never heard these Savings Bonds before. Surprisingly not only they are easy to purchase, but also they are one of the most effectively way to protect your principles even when you have no financial knowledge. Don’t be intimidated by their name, since they are also referred as the Patriot Bonds.
EE, Doubles in 20 years
One of them is called EE. Yes, that’s the name. If you purchase $10,000 today, the US government will offer you a small float interest rate every year. If you can afford to let the money sit there for twenty years, it’ll give you $20,000 back. You heard me right, it doubles every twenty years, which is about 3.5% annual rate return.
I, Inflation protector
Let’s pick another kind, called I this time. If you purchase this I bond, it’ll pay you a rate a variable inflation rate on top of a fixed rate. As today, the rate is 6.89%, vs couple of month ago, it was higher. You can imagine the higher rate compensates the inflation as we experience right now. If the inflation were low, you would get less paid.
Time is your friend
What’s the catch for these nice bonds? There’s couple of common features about them. One, the return only makes sense if you wait for long enough, for instance twenty years; Two, the return might make sense only when you have enough money invested before a condition is met, for instance, when the interest rate gets high. More or less, you need to think of these bonds as some type of insurance to protect you against disaster. Under normal condition, especially when you don’t have much financial knowledge, time is only it takes for you to preserve as much cash as you can for whoever needs it most in the future. IMHO, this is the best part.
Qualified education expense
I’ll throw you another kicker if you are still not convinced, you can use these bonds to pay for educational tuition without paying tax. Of course you need to be qualified, such as income limit and age. Overall if you prepare to send your kids to college twenty years later, this is a very good option for you to save money and then spend it later with more money and less tax.
Summary
Government creates some bonds for us to take advantage, such as the EE and I Savings Bonds. Please take advantage, and all you need is the patience and initial savings. They are for you to save.
