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How do savings bonds work?

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Savings bonds offer a secure way to grow your money over time with the backing of the U.S. government, making them a low-risk investment option. Here’s a breakdown of how they work:

  1. Types of Savings Bonds: The most common are Series EE and Series I bonds. Series EE bonds provide a fixed interest rate, while Series I bonds offer interest adjusted for inflation, helping to maintain the value of your investment over time.
  2. How They Earn Interest: Savings bonds earn interest monthly, which compounds semiannually, allowing your money to grow consistently. The bond’s interest is typically exempt from state and local taxes, and federal tax can be deferred until you cash out.
  3. Buying and Redeeming Bonds: You can purchase savings bonds directly from the U.S. Treasury’s website with a minimum investment. Bonds can be redeemed after one year, but cashing them before five years means forfeiting the last three months of interest.
  4. Benefits of Savings Bonds: Savings bonds are ideal for conservative investors or those saving for long-term goals like education. Their low risk and tax benefits make them a reliable choice for gradual, stable growth.

For a full guide to understanding and investing in savings bonds, read the full article on CNN.