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U.S. Savings Bonds
In the words of former president Calvin Coolidge, “Patriotism is easy to understand in America. It means looking out for yourself and looking out for your country.” (New Dictionary of Quotations) There are countless ways that we are able to use our money: We can waste it on superfluous spending, put in it sit in the bank, or even invest in the stock market. But there is only one way to invest your money that is safe, secure and will help both you and your country: U.S. Savings Bonds. Contrary to what some may believe, bonds are not old-fashioned and outdated, but remain extremely popular, and for good reason. They offer our spiritual and financial commitment to our country in a time of international danger. Today, join me on a patriotic journey as we explore the financial possibilities by first looking at the history of savings bonds, next comparing savings bonds to other investments, and finally, learning about all the exciting reasons to buy them.
Before we proceed, let’s answer the basic question: what is a bond? Bonds may seem confusing, and it is true that all their intricacies can get quite mind-boggling. However, have no fear. The basic concept is actually quite simple. The definition of the word bond is “a duty, promise, or obligation by which one is bound.” (American Heritage Dictionary) A U.S. Savings Bond is a special type of bond. It is “a written promise by the government to repay, with interest at a given rate and at a specified time, a sum of money being loaned by an individual.” (Grolier) The process works like this. First, you purchase a savings bond. Your money then goes into a government fund, where it is used to help fund the national debt and to pay for a wide range of important activities such as national defense, homeland security and education. Finally, when you cash in your savings bond, you receive the amount you paid plus interest. (Washiva) Unlike other investments, a U.S. Savings Bond is backed by the full faith and credit of the United States government. Now that’s something you can depend on.
The first U.S. Savings Bond was issued in 1935 as a means to provide a “secure and attractive instrument for investors and to provide an additional source of revenue for the Treasury” (Savingsbonds.com). Historically, bonds have been very popular during times of national crises. (Grolier) During World War II, popular Hollywood personalities, such as John Wayne, Bing Crosby, and Bugs Bunny, helped the war effort by starring in commercials to sell bonds that would play during movies. (City of Santa Clarita) Dramatic posters, such as this one, were also a popular way to advertise war bonds. The war bond campaign caused a “unique fusion of nationalism and consumerism” and “offered Americans a financial and moral stake in the war” (Department of Treasury).
Today, the most common types of U.S. savings bonds are the double E bond and the I bond. Both can be purchased in denominations ranging from $50 all the way to $10,000. EE Bonds make impressive gifts because you purchase them for half of their face value. Therefore, to buy a $50 bond you would only have to pay $25! In 17 years, you are guaranteed to earn the face value of the bond and depending on the interest rate during that time, perhaps even sooner! The other type of savings bond, the I bond is designed to protect the owner against inflation in prices. The I bond is purchased at face value and can be bought in its traditional paper form or using the paperless online Treasury Direct system. Both types of bonds will continue to earn interest for thirty years, although the money can be withdrawn as soon as one year after the bond is purchased.
Bonds stack up very favorably when compared to other things that you could be doing your money. You could gamble away your money at a casino or in the stock market and watch it all whither away. Sadly, the stock market’s performance has been very poor lately. In fact, according the Wall Street Journal, investors lost about $2.8 trillion dollars in U.S. stocks last year! As is shown on this graph, if you had invested $1,000 in the S & P 500 at the turn of the millennium, you would now have a mere $624 dollars; however, if you had bought a EE bond, you would now have almost $1,200. If you had invested your money in savings bonds, you would have swept your money together into a place of safety. According to the latest financial data from the March 10th issue of the Detroit Free Press, interest rates on bonds are currently so high that they are a great way to secure your money even if you plan to only hold the bond for a short time. “The more money you have sitting around doing nothing, the more the numbers can add up to something.” U.S. Savings Bonds are currently paying interest rates as high as 4.08%. More than 55 million Americans currently have over 800 million dollars invested in U.S. Savings Bonds. (AARP) Why not join them on the path to success?
Now that we’ve bonded patriotically and financially, you may still be wondering…why exactly should I buy U.S. Savings Bonds? (Use AMERICA visual—Reasons are an acronym) First of all, U.S. Savings Bonds are affordable. As a matter of fact, they start at just $25 and can even be purchased through payroll savings plans. The series EE bond is also market based. This means that you have the potential to earn interest above the guaranteed rate if you hold the bond for more than five years. U.S. Savings Bonds are also easy: Easy to track, easy to save, and easy to buy. U.S. Savings Bonds can be purchased at most local financial institutions and even online using a credit card. While you may be in trouble if your dog eats your homework, if your dog eats your savings bond, it can be replaced. Furthermore, U.S. Savings Bonds are reliable. They are backed by the full faith and credit of the United States. Their interest is free from state and local income tax. Federal tax can be deferred until the bond is redeemed, and may not have to be payed at all if the bond is being used for education. Bonds are convenient. They can be cashed any time after one year or held as long as 30 years. They are a great way to plan for your future. They also make great gifts. Savings bonds are a popular gift for newborns because “one size fits all” and the gift “grows” in value as the child grows. Finally, savings bonds are an attractive investment because they offer safety and security as the stock market rises and falls. (Savingsbonds.gov)
(Put on music) But wait! The best reason of all to buy savings bonds is that when you invest in savings bonds, you invest in America. America is a country of teachers, students, engineers, lawyers, doctors, and farmers. We are a country of doers and thinkers. What Americans can dream, Americans can do! We are united together and each holds with in us an invincible spirit of freedom. (Santa Clarita)
To learn more about U.S. Savings Bonds, log on to www.savingsbonds.gov or call 1-800-4-US-BOND. You have an obligation to yourself, to your family, and to your country. When you invest in U.S. savings bonds, you invest in America. You invest in your future and in the future of your country. Now what could be more patriotic than that?
**R. Goren – Groves Sales 2003