- Savings bonds are an option for saving money. They gained popularity during World War I and II as government-issued paper savings bonds that gathered interest over time. Basically purchasing a savings bond in the amount of $50 would increase over time at a set interest rate.
- Many people like to invest their money in the government, knowing that the government will be using that money for efforts that benefit society at large. In return, for voluntarily lending money to the government, the investor will receive a return on the money invested. Banking institutions will usually post bond interest rates or will help you gain access to this information, and they will remain the facility for cashing your savings bond. They will pay out your savings bond, with the applicable interest based on the length of time you have held the bond, and then collect that money back from the government. So the banking institution is the volunteer mediary between you, your bond and the government.
- Once you decide to purchase a savings bond, you will usually either pay for it in its entirty upfront or enter into a monthy payment plan through your employer or another entity. Once payment has been made in full, you will either receive an electronic receipt with a confirmation number or you will receive a paper certificate. Bonds begin earning interest, at their set interest rate, once they have been paid for in full. That interest will be compounded on a semiannual or annual basis. Note: Bonds that compound on a semiannual basis will give you a larger return over a longer term. Savings bonds will pay interest until they are end-of-lifed--usually around 30 years.
