How Do Saving Bonds Work?

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Savings bonds are bought at a local bank, as opposed to a local brokerage firm, and they traditionally pay less interest than the traditional bond market. Find out why savings bonds have favorable tax consequences with help from a personal asset manager in this free video on the bond market and money management.

Part of the Video Series: Bond Market
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Video Transcript

Hello, I'm Roger Groh with Groh Asset Management. Uncle Sam needs you. Well, maybe not you personally but he definitely needs your money. One of the ways that you can help Uncle Sam is by buying US savings bonds. Now these are really just like any US treasury note or bill with a little bit different tax consequence. But the way that you buy them is totally different. You buy them at your local bank for instance as opposed to your local brokerage firm like you do with traditional stock or bonds. Now today because banks more often than not have a brokerage firm associated with them, you may be able to do them in the same place, it's just one person wears a bank hat and one person wears a brokerage hat. And these are in the case of US savings bonds, fully guaranteed obligations of the US government. Traditionally they pay a little bit less interest than the traditional bond market because there are some favorable tax consequences with owning them. And more often than not, you buy them as gifts, that's their primary use and you give them to fund an education fund for a grandchild or a grandson or whatever it might be. So look at these as really as a marketing net setup by the US government to be sold through the banks to raise capital. I'm Roger Groh, that's a little bit about US savings bonds and how you buy them and remember, Uncle Sam wants you. Thank you for spending a few minutes with me.

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