Savings Bond Plan

  

Categories: Bonds

Back in the day, this was your grandmother's preferred birthday present to you. She'd pay $19 for a $25 savings bond that matured in a decade. And no, she never paid attention to the extremely low interest rate she was getting on her money.

Savings bonds are issued by the Treasury, and are a simple and cheap way of lending to Uncle Sam. There is no stated maturity date, but interest would be paid for a certain period. After that period ends, the bonds no longer pay interest. Also, interest isn't paid each year; instead, it's tacked on to the existing principal, so when you cash it in for college (or that '69 Barracuda), you receive the face value (they're usually sold with a $500 face value), plus all that accrued interest. And it ain't much.

Thanks, Grandma. You coulda bought a few shares of Exxon instead.

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