Reliable.
Savings bonds have a
fairly predictable rate
of return. You pretty
much know what they'll
be worth in the end
when you buy them. I
bonds have two interest
rates, one that will
vary with inflation.
Tax
break. Interest
may be tax-free if used
for education, depending
on the savings bond.
Low
minimum. Savings
bonds don't require
a large amount of money.
You can get an EE bond
for as little as $25.
Security.
These are backed by
full faith and credit
of the U.S. government,
at least to a certain
extent.
Not as liquid. You have to keep EE and I bonds for at least one year. When you do cash them in, you get your principal, plus whatever interest they've earned.
Long-term commitment. With bonds, you're locking up your money for a number years.
Not
competitive.
You may be able to get
a better rate elsewhere.
Excellent
vehicles for savers looking
to invest long-term and
who don't mind a relatively
low rate of return in exchange
for stability and tax-deferred
interest. Since you don't
pay taxes on the interest
until you actually cash
them in, they can also be
helpful in controlling income
for tax purposes.
You can't cash them in for the first year, so they are not a good choice for money you might need immediately.
If either Series EE or I are used for college, then the interest is tax-free. Tuition-tax benefits and a lengthy maturity cycle have long made them a favorite gift for grandparents who want to contribute to a grandchild's education.
Series I bonds pay a rate that's adjusted for inflation, so consumers also use them as a hedge against an economic downturn.
Trying
to figure out which options
best match your savings
strategy? Here are several
key points to compare and
contrast at a glance.
