WHAT IS A SAVINGS BOND

A SAVINGS BOND is a bond sold to the general public by the government.

Savings bonds are a lower-risk way of saving.

Upon buying a savings bond, one is actually loaning money to the government for a set period of time at a fixed interest rate.

Some features of a savings bond

a)Principal – this is the amount on which the issuer pays interest.

b)Maturity of bond – it is the length of time until when the issuer has to repay the principle amount.

c)Coupon – this is the interest rate that the issuer pays to the holder.

What should I know about a savings bond?

1)With a savings bond you may find yourself more tied in than with a normal savings account.

2)A savings bond may have a variable rate of interest meaning it could pay less or more than you’re starting interest rate over the term. But nevertheless is will more commonly have a fixed rate.

3)It can cost you a lot of interest to come out of a savings bond if you need earlier access to your money. Less commonly, you may not be able to withdraw your money at all during the term.

4)A savings bond will run for a set period – usually anything from a few months to five years, or even longer in some cases – as opposed to a normal savings account which has no set term.

5)At the end of the term of the savings bond your money will most likely be transferred to a low-paying maturity savings account. So be sure to review your savings arrangements when you reach the end of the term.

How to Purchase a savings bond and have it all by yourself.

Savings Bonds require the purchaser to have a Treasury Direct account, which requires a social security number, a driver's license, a checking or savings account, and an email address. The purchaser can select the owner of the security, and the amount of the Savings Bond.

After submitting an order, a message will normally confirm the money will be taken out of the account within one day. A record of the Savings Bond purchase is placed in the purchaser’s account.

Here are some of the types of savings bonds that are currently in circulation in different countries.

In the United States of America:

1)Series EE bonds being the usual bond type extended to an individual investor.

2)Series I bonds are also available.

In Canada:

There are 2 types of savings bonds offered by the Canadian government:

1)Canada Savings Bonds (CSBs) and

2)Canada Premium Bonds (CPBs).

What types of interest do I expect from a savings bond account?

There are two types of interest rates that most savings bonds accounts offer. These are:

a)Regular-interest bonds – this is when one gets interest payments each year on the anniversary of the issue date.

b)Compound-interest bonds – in this one, Interest is automatically re-invested each year.