How Do EE Bonds Work?
Other People Are Reading
-
What Are EE Bonds?
-
EE bonds are a popular government backed savings tool. Any U.S. citizen can own EE bonds, even minors. Since May 1, 2005, EE bonds earn a fixed interest rate. The fixed interest rate depends on when the bonds are purchased. Buying EE bonds when interest rates are high will result in a higher return on your savings investment.
How to Buy EE Bonds
-
EE bonds can be purchased at most financial institutions or online at Treasury Direct. See the Resources section below for Treasury Direct's web address. The bonds can be purchased for yourself or as a gift for someone else. To purchase EE bonds, you need to provide the full name and social security number for the person that the bonds are being purchased for.
-
Treasury Direct
-
At financial institutions, only paper EE bonds can be purchased. They are purchased for half face value. So if you want to purchase a $50 bond, you would only pay $25. Treasury Direct gives you the option of purchasing paper EE bonds or electronic EE bonds. With an electronic EE bond, you pay full face value. So if you want to purchase a $50 electronic bond, you would pay $50. Paper EE bonds can be purchased for a value of $50 or more. There is a $10,000 maximum yearly purchase limit per person. Electronic EE bonds can be purchased for a value of $25 or more. There is a $5,000 maximum yearly purchase limit per person.
Interest
-
EE bonds earn interest on a monthly basis. The government guarantees that once EE bonds matures it will be worth at least double the face value. If interest rates were not high enough to double the face value, the government will make an adjustment and add value to the bonds when they reach maturity.
Cashing EE Bonds
-
EE bonds cannot be cashed in until at least one year from the date of purchase. Although the bonds can be cashed in after one year, they are not intended to be cashed that early. They are meant to be a long-term investment. After one year, bonds purchased at half face value will be worth significantly less than the full value of the bonds. Bonds purchased at full face value will not be worth much more than the full face value. EE bonds that are cashed in before five years from the purchase date, will have three months of interest deducted from the value of the bonds.
Maximizing Money Earned
-
To maximize the money that you earn on EE bonds, you should not cash them in until they reach full maturity. EE bonds mature at 20 years after the purchase date. The government guarantees that mature EE bonds will be worth at least double the face value. You can choose not to cash your bonds in at maturity and continue to let them earn interest. EE bonds continue to earn interest for 30 years from the purchase date.
-
