BONDS

Hey GABbers, Once again I have another Idea about savings

So recently due to the economy people have been afraid to put their money in stocks, banks, even CDs. But there is one lender who will almost never go broke, The United States Government. While lead me to the topic of Federally Insured Bonds.

There are currently two types of bonds you can buy today, I bonds and EE bonds. Of course there were many other types of bonds available a few years ago, like the H bond or E bonds. But for right now let’s talk about the types of bonds that we can actually buy today.

First is the EE bond, now although these types of bonds are great for long term investments, many are give these as gifts. EE bonds are bought half of face value, so a $100 EE bonds is bought for only $50. Which is why these are perfect for gifts, they look like $100 when actually the buyer only paid $50. Now EE bonds will reach face value in about 17 years, and the APY is 1.3%. Again a good gift for a new born baby, because in 17 years those bonds will be worth their face value and its perfect timing for college.

Next am I bonds, which I personally think are a much better investment. I bonds are purchased at their face value. So a $100 I bond will be bought at $100. Yet these bonds tend to have much higher interest then EE bonds. The interest rates for I bonds do change twice a year and are determined by two things; a fixed rate set by the U.S. Treasury and the rate of inflation. Today an I bonds has an APY of 5.64%, much higher then the I bond and most CDs offered.

Now both I bonds and EE bonds must be head on to for one year before they are cashed in. And if they are cashed in before the bond reacts the age of five, you lose 3 months of interest. Yet after 5 years you are free and clear to cash the bonds at any time, and they will continue to earn interest for 30 years.

But effective January 1, 2008, each social security number is only able to buy $5,000 worth in bonds per year.

At most financial institutions you can purchase bonds, but another place to go is TreasuryDirect.gov