What are U.S. savings bonds?


Quick Answer

A U.S. savings bond is an investment option from the federal government for which individuals pay face value and earn interest, according to the U.S. Securities and Exchange Commission. The U.S. government essentially borrows the money for spending needs and pays the buyer back with interest upon redemption.

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Full Answer

Savings bonds were once sold as paper documents at financial institutions, but in 2012 the U.S. Department of the Treasury switched to an electronic format that is only available online, notes the Treasury Department's Ready.Save.Grow. Savings bond holders have the option of redeeming at any time for the face value plus the interest earned, states the SEC. If a savings bond is redeemed in the first five years, the holder forfeits the interest earned in the last three months.

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