Overview: Purchasing Savings Bond
You probably realize the value of purchasing savings bonds: it is known as one of the safest ways to save because the bonds are backed by the federal government. Or maybe you’re wondering, “Can you still buy savings bonds?” When you buy savings bonds, they are overseen by the Bureau of Public Debt. These investments do not fluctuate and earn a savings bond interest rate compounded twice a year that accrues monthly.
Buying savings bonds allow you to give a gift to your children for future educational expenses. Plus, when the child cashes in the bond, the accrued interest may be tax-exempt. The U.S. Department of Treasury is still issuing savings bonds and has since 1935. The only big change recently implemented is the conversion of paper savings bonds to digital savings bonds.
Where to Buy Savings Bonds in the U.S.
Savings bonds are more accessible today than ever before. If you plan to purchase savings bonds in the near future, you will not have to look very far. You can buy savings bonds online or have a payment plan set up through your employer. Paper bonds are no longer available at financial institutions; however, the IRS will allocate your refund to a paper savings bond if you request the proper form.
Image Source: Where to Buy Savings Bonds
To buy savings bonds in the United States, you must meet one of these conditions, according to the U.S. Department of Treasury:
- You must be a United States citizen, even if you live elsewhere
- You must be a United States resident
- You must work in the United States for a civilian company, even if you live in another country like Canada or Mexico
Managers of trusts, estates, corporations, and partnerships can also buy U.S. savings bonds. Children, under the age of 18, cannot purchase savings bonds, but their parent or guardian can do it for them.
All-in-One Change Management Tools
Top Rated Toolkit for Change Managers.
Get Your Change Management Tool Today...
How to Buy Savings Bonds Online
Purchasing savings bonds online is probably the easiest and most readily accessible way to secure this type of investment. The U.S. Department of Treasury’s website allows you to purchase savings bonds as well as create a retirement account. The site can help you and your family:
- Teach children about financial planning
- Learn about where to purchase savings bonds
- Provide a resource for teachers to teach students about money management
- Get in-depth information about how to buy a savings a bond
- Gain access to saving resources
- Find lost bonds
- Calculate the value of your paper bonds
- Get an idea of how your earnings will grow with the savings bonds interest rate
- See the difference between Series EE and Series I savings bonds
- Purchase savings bonds as gifts
- Learn about using savings bonds as part of your retirement planning
The U.S. Department of Treasury’s website, TreasuryDirect.gov, is user-friendly. You can create an account and purchase savings bonds within minutes, provided you have the required information. The process is pretty straightforward:
- You will need your Social Security number (or tax identification number). If you are purchasing savings bonds for children, you will need to provide their Social Security numbers as well.
- TreasuryDirect will need an email address, your address within the United States, and your checking or savings account routing numbers. You will need to click “Open an Account” and choose the account type Individual.
- Use the information you gathered beforehand to complete the online application.
- The site will ask you to choose a personalized image and caption for security purposes. You will also be asked to set a password and answer three security questions. These extra measures are to safeguard your account.
- The U.S. Department of Treasury will send you an email with your TreasuryDirect account number. Once you receive your account number, you will be able to purchase savings bonds online.
How to Purchase Savings Bonds through Payroll Savings
Buying savings bonds online is easy; however, a payroll savings plan is available if you would rather have the money automatically deducted. Simply create an account with TreasuryDirect.gov, the U.S. Department of Treasury’s website. You can choose the Payroll Savings Plan option, the type of savings bonds series you need, and the dollar amount to be withheld.
Request that your employer send the dollar amount to TreasuryDirect. This amount is deposited into a Payroll Certificate of Indebtedness, known as a C of I. This certificate does not earn any interest but holds the money until the dollar amounts meets the requested savings bond amount. At this time, a savings bond will be purchased. This process will occur automatically until you cancel.
You can choose either Series EE savings bonds or Series I savings bonds, but once chosen, that will be the only series your Payroll Savings Plan will contribute into.
You may be wondering how to buy savings bonds in more than one series using the Payroll Savings Plan. The account number TreasuryDirect provides you with has “P” in the front. Give your employer the account number without the letter “P.” This will place your money into a different account instead of the C of I account. According to TreasuryDirect, you can use this method to set up a recurring schedule, purchase marketable securities, or purchase registrations of savings bonds.
Choosing online as where to buy savings bonds provides a future benefit as well. When the time comes to cash in your savings bonds, you can have the funds direct deposited into your checking or savings account within two business days. This alone can save you time and travel.
Funds from your pension or annuities can also be direct deposited into your TreasuryDirect account. If you would like to buy savings bonds using your checking or savings account on a recurring basis, check with your financial institution.
Image Source: Purchasing Savings Bonds
How to Buy Savings Bonds as Gifts
You can buy savings bonds as gifts without ever leaving your home. Using your account on the U.S. Department of Treasury’s website, TreasuryDirect.gov, you can purchase savings bonds and print out a gift receipt to give the recipient.
TreasuryDirect requires you to hold the savings bonds in your account for five days before giving them to the recipient. This allows the funds to clear and the savings bond to be authorized. To purchase savings bonds as a gift, you will need the recipient’s full name, Social Security number (or taxpayer identification number), and their TreasuryDirect account number. The recipient will receive an email as soon as the funds clear.
If you are purchasing savings bonds for a child, the bonds are received through a Minor Linked account. This account is created through the parent’s or guardian’s TreasuryDirect account.
Buying Savings Bonds with Your IRS Tax Refund
Paper savings bonds are available using your IRS tax refund. The only series of bonds you can purchase with your tax refund through the IRS is the Series I. You will need to complete Part 2 of IRS Form 8888. You can use the entire tax refund to buy savings bonds or only use a portion and have the remaining refund sent to you.
You can purchase savings bonds using this method in multiples of $50. You choose whether or not to convert and manage the savings bonds online at TreasuryDirect. Creating an account is not mandatory for a paper savings bond bought with an IRS tax refund.
When you complete the IRS Form 8888, you can list yourself as a single owner or co-owner, list a beneficiary, or list the name of other people if giving the savings bonds as gifts.
Converting U.S. Paper Savings Bonds to Digital
You may be asking yourself, “Where can I buy savings bonds in paper?” The IRS tax refund is basically the only non-digital option.
The goal of the U.S. Department of Treasury has been to move all savings bonds to digital form over a five year period, beginning in January 2012.The Treasury estimates the move will save the government over $70 million. As of January 2012, you could no longer purchase paper savings bonds at a financial institution; however, the paper bonds can be redeemed at any financial institution.
If you have paper bonds, TreasuryDirect can convert them to digital bonds through the use of their SmartExchange Program. The program can convert Series E, EE, and I bonds to electronic bonds by creating a Conversion Linked Account. You must have a TreasuryDirect account to participate. The program will also let you convert paper savings bonds to electronic if you are:
- An account owner
- Owner with a beneficiary
- Needing to convert bonds bought as gifts
- Needing to convert bonds you inherited
- An account manager for a trust, estate, or corporation
You are not required to convert your paper bonds to the electronic form. Doing so, however, makes redeeming the bonds easier. You may find it simpler to keep track of all your savings bonds in a secured place online and not have to worry about losing the paper securities.
The Best Time to Buy Savings Bonds
According to TreasuryDirect, the Series EE and I savings bonds will earn interest for 30 years, at which time the bonds will reach maturity. Series EE bonds purchased between November 1, 2015, and April 30, 2016, will earn a fixed interest rate of 0.10 percent. Series I bonds purchased between November 1, 2015, and April 3, 2016, earn a current rate of 1.64 percent.
Experts are split about whether now is the best time to purchase savings bonds. It is advisable to diversify your funds, but savings bonds are a safe investment to add to your portfolio or to fund your child’s future college expenses.
The benefits of buying savings bonds are numerous. U.S. savings bonds offer comparative rates with interest that accrues monthly and compounds semi-annually. Plus, you can purchase a savings bond with as little as $25. When you purchase a savings bond today, if it is ever lost or stolen, the U.S. Department of Treasury can replace it with an electronic version.
The federal government backs the value of each bond, and the interest is tax-exempt from state and local taxes. With so many tax benefits and accessibility, investing in savings bonds can be a wise choice for you and your family.
Whether this is your first time purchasing a savings bond or you need to know where to buy savings bonds, the U.S. Department of Treasury’s website can help. TreasuryDirect will help you purchase and keep track of your bonds and other investments. Savings bonds do not need to be complicated, and with all the resources available, you shouldn’t have any problems learning your way around.
AdvisoryHQ (AHQ) Disclaimer:
Reasonable efforts have been made by AdvisoryHQ to present accurate information, however all info is presented without warranty. Review AdvisoryHQ’s Terms for details. Also review each firm’s site for the most updated data, rates and info.
Note: Firms and products, including the one(s) reviewed above, may be AdvisoryHQ's affiliates. Click to view AdvisoryHQ's advertiser disclosures.