Savings bonds are an excellent way to invest your money. They are issued by the U.S treasury. You can buy them at almost any bank. Their are different kinds though, the kind I buy are called Series EE bonds. Series EE bonds are issued at 50% of their face value and reach final maturity 30 years from issuance. Interest is paid semiannually and added to the current value of the bond. They are designed to reach face value in approximately 17 years although an investor can hold them for up to 30 years and continue to accrue interest. The rate of interest is recomputed every six months at 90% of the average five-year Treasury yield for the preceding six months. Thus in the space of a decade, interest dropped from well over 5% to 1.4% for new bonds in 2008. My grandma started buying me them on my first birthday and continues to buy them for me. The first 4 were all $1000 ones then came some $500 and then $100 ones and now they are only $50 because she buys them for four kids in the family, but they are a really good long term investment if you have some money you want to invest. You can buy them as $25, $50, $75, $100, $200, $500, $1000, $5000, and $10,000 if you want to go that high. Another type of bond is the I Series bond. Series I bonds are issued at face value and have a variable yield based on inflation. The interest rate consists of two components: the first is a fixed rate which will remain constant over the life of the bond and the second is a variable rate reset every six months from the time the bond is purchased based on the current inflation rate. New rates go into effect on May 1 and November 1 of every year. The fixed rate is determined by the Treasury Department; the variable component is based on the Consumer Price Index from a six month period ending one month prior to the reset time. Like EE bonds, I bonds are issued to individuals with a limit of $5,000 per person (by Social Security Number) per year. A person may purchase the limit of both paper and electronic bonds for a total of $10,000 per year. Selling the bonds before five years will incur a penalty of three months of interest. As of mid-2008, the fixed component had declined over a decade from more than 3% to nothing—0% for new bonds. Savings bonds are always a good investment tool to keep in mind especially when you are young because they will gain a lot of interest by the time you are older. Here are some sites that can help you if you want to know more about purchasing savings bonds.
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You may defer payment of federal income taxes until a savings bond reaches final maturity -- 30 years from the issue date -- or until you redeem it, whichever comes first. The Internal Revenue Service requires that you report savings bond earnings for federal income tax purposes no later than the year in which a savings bond reaches final maturity, even if you do not redeem it.
You may also elect to report your savings bonds earnings to the Internal Revenue Service and pay applicable federal income taxes annually.
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