How Do Savings Bonds Work?

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Savings bonds operate like all bonds, and bonds are debt securities that are issued by an authorized borrower. Learn about why savings bonds are generally bought at face value with help from a licensed financial planner in this free video on bonds and investing.

Part of the Video Series: Bond Investing
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Video Transcript

My name is Bill Rae. I'm with Alumni Financial Services. I have been in the business of the finance world for well over 20 years and your question is how do savings bonds work. Well US savings bonds operate like all bonds and a bond in the finance world is a debt security issued by an authorized borrower meaning and you owe the debt obviously, meaning they're borrowing money from you and they agree to pay you back interest on your money. Savings bonds are interesting because you generally buy them at what is considered a face value, $50, $100. You're not going to pay that but at the agreed time you can cash them back in for that amount, that's your interest, that's your profit. Good safe bet, guaranteed that the US Government is probably going to be around. However, I must caution you really should talk with a licensed professional. We're not listening or offering stock advice, we're just trying to get you an idea of what a bond is. My name is Bill Rae. I'm with Alumni Financial Services and as always we urge you to understand whatever agreement or contract you're signing and what it is that they want, how and when do you get your money back and what reasonable interest or repayment profit on your money you expect to get and as always seek competent advice. This is Alumni Financial Services and we're always here to help you build wealth.

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