How to Save Money Using Savings Bonds

List: Posted: 04/04/11

Our grandparents put them in our stockings at Christmas. Our parents hid them in our Easter baskets. You probably forgot that there are most likely some floating around your house with your name on them. They're savings bonds!

Savings bonds are a great way of saving money. They're issued by the U.S. government in an amount the buyer chooses. If you're interested in saving money, whether it's through a savings or other account, research savings bonds.

When you're trying to save money, oftentimes you might be concerned about taxes. The great thing about savings bonds is that they're state and local tax exempt. You can also defer the taxes that come along with accrued interest, until the bond is cashed in. And savings bonds earn a slightly higher interest rate than a bank account.

There are a few downsides to savings bonds that are worth mentioning. You might be working towards saving money, but emergencies happen and you might need access to your finances. You have to wait a year before you can redeem a savings bond. Additionally, if you redeem a bond during its first five years, you lose the last three months’ interest.

If you're really saving money for the long-term, it's recommended that savings bonds aren't your entire savings. Saving money with a retirement account would earn higher interest rates, as would saving money by investing in the stock market.

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      The material in this article is for informational purposes only. The views expressed in this article are those of the author and do not necessarily reflect the views or opinions of Local.com. See Additional Information

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