Savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government's borrowing needs. U.S. savings bonds are considered one of the safest investments because they are backed by the full faith and credit of the U.S. government.
History
On February 1, 1935, President Franklin D. Roosevelt signed legislation that allowed the U.S. Department of the Treasury to sell a new type of security, thus the Savings Bond was born. One month later, the first Series A Savings Bond proceeded to be issued with a face value of $25. At first, the main purpose was to help finance World War II, these were referred to as Defensive Bonds. On April 30, 1941 Roosevelt purchased the first bond from Treasury Secretary Henry Morgenthau. The next day, they were made available to the public. After the attack on Pearl Harbor, Defensive Bonds were informally known as War Savings Bonds, citizens could buy the bonds for a dime. All the revenue coming in from the bonds, went directly to support the war. Even after the war ended, Savings Bonds became popular with families. Unlike before, people started to just wait to cash them so the bonds would grow in value. To help sustain post-war sales, they were advertised on television, films, and commercials. Even when John F. Kennedy was president, he encouraged Americans to purchase them, which stimulated a large enrollment in Savings Bonds. By 1976, President Ford helped celebrate the 35th anniversary of the U.S. Savings Bond Program. The film, "An American Partnership" honored the role of citizens in financing the nation's growth. In 1990, Congress created the Education Savings Bond program which helped Americans finance a college education. A bond purchased on or after January 1, 1990, is tax-free if used to pay tuition and fees at an eligible institution.
In 2002, the U.S Department of the Treasury's Bureau of Public Debt made Savings Bonds available for purchasing and redeeming online. Finally, on January 1, 2012 banks and other financial institutions terminated their sales of bonds. Currently, Americans can only buy U.S. Savings Bonds online at http://www.treasurydirect.gov/.
General information
Savings Bonds come in eight values: $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. After purchase, the holder must wait at least six months before cashing it in, when they will receive the capital plus some interest. The maturity periods can vary. For example, if you buy a bond with a value of $50 for $25, you'll have to wait at least 17 years to get back your investment from the government. Though you are able to wait as long as you want to get your money back, the longer you wait, the greater interest you earn. Savings Bonds are protected because they are secured by the U.S. government. The principal and earned interest are registered with the Treasury Department, so if a bond is lost, stolen, or destroyed they can be replaced at no cost. Savings bonds can also have value as a collectible since the government stopped issuing them in paper form.
Purchasing
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 ($50, $100, $500, etc.) After submitting an order, a message confirms the money will be taken out of the account within one day. A record of the Savings Bond purchase is placed in the purchasers account, as paper bonds are not issued.
Overview
oMinimum Purchase: $25
oMaximum Purchase: $30,000 per person per year
oInterest: 90% of 6-month average of 5-year Treasury security yields, added monthly and paid when the bond is cashed
oMinimum Term Of Ownership: 12 months
oEarly Redemption Penalty: Forfeit three most recent months' if cashed before 5 years
References
Bortz, D. (n.d.). Bye, bye paper savings bonds. In Personal Finance. (Reprinted from U.S. News & World Report, 40(8), 128, 2011, September)
Code of Federal Regulations (CFR) Department Circulars, 31 C.F.R. § 353 (2012).
Miller, T. (2003). Kiplinger's Practical Guide To Your Money. Washington DC, US: Kiplinger Washington Editors Inc.
External links
- http://www.treasurydirect.gov/timeline.htm
- http://www.teenvestor.com/investors/cdbonds/cdbonds_bonds.htm
- http://www.treasurydirect.gov/indiv/research/research.htm
Interesting Informations
Looking products related to this topic, find out at Amazon.com
Source of the article : here
EmoticonEmoticon