How much do you make on savings bonds

By: AHMED IBEN HATAB Date: 23.06.2017

Last month I made a presentation to a bunch of high school students on the importance of basic financial planning skills. I had hopes of starting a conversation about saving for large purchases such a college education or a car. But the students were surprisingly interested in learning about EE savings bonds — those gifts that grandparents and other relatives give children to commemorate life events such as a birthday, first communion, or a Bar Mitzvah.

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Savings bonds that double in value every seven or eight years, however, have gone the way of encyclopedia salesmen, eight-track tapes, and rotary telephones. EE bonds sold from May 1, to October 31, will earn an interest rate of 0. You can buy EE savings bonds through banks and other financial institutions, or through the US Treasury's TreasuryDirect website.

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The interest rate at the time of purchase dictates when a bond will reach its face value. This rate is detemined by discounting it against the 10 year Treasury Note rate, currently about 2. Years ago, you could calculate when your bond would reach face value by using a simple mathematical formula called the Rule of If you simply divide an interest rate by 72 you can determine the number of years it will take for something to double in value.

Fortunately, the Treasury has made a promise to double your investment in a EE savings bond in no less than 20 years.

You need to wait the full 20 years to get the face value. At that point, you've effectively gotten an annualized return of 3. If Grandma wants to buy a EE savings bond for a grandchild to cash in to cover some college costs, she ought to buy that bond at the same time she's pressuring her kids to start working on grandchildren.

But back to the boy who stood up in class to talk about the savings bonds.

What about the bonds his grandparents had purchased over the past several decades? It just depends on when they were purchased.

The Treasury has a savings bond wizard that will calculate the value of your old paper bonds. Give it a shot. You may be pleasantly or unpleasantly surprised at the value of the bonds you have sitting around.

Freedman, CFP, is president and CEO of Freedman Financial in Peabody, Mass. He has been delivering financial planning advice to mass affluent Baby Boomers for more than two decades. Uber Uber Just Made It Easier for You to Tip Your Drivers.

how much do you make on savings bonds

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how much do you make on savings bonds

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