How do Savings Bonds Work

Wondering Why You Should Invest in US Savings Bonds?

Are you wondering why you should invest in United States savings bonds, or how savings bonds work? This is a question that not enough people are considering these days, because most people are pressing their luck instead by gambling with stocks and other investments. So many people are turning to penny stocks thinking that they cannot lose, but this thrilling stock market is no way to turn a buck. Instead, people should look at savings bonds as a valuable part of an investment portfolio even if they do not appear to be as exciting as an investment.

First of all, you need to understand what a U.S. Savings Bond is if you want to take advantage of these lucrative investments. Back in the day, savings bonds were a popular form of long term investment for people who could not afford to buy common stock. This is back when a long term investment was only an investment that lasted longer than a couple of weeks. There are plenty of different savings bond options available to you out there, but the ones that are the best and the most worthy of your time are the ones that are backed by the United States. At their basic level, these savings bonds are a promise that if you lend money to the government, you will get it back with interest attached. The one risk lies in that the entity you lend to may not be able to pay it off as they have agreed to. However, when lending to the United States Government through US treasury bonds, the risk is a great deal less. Unless the entire American government goes bankrupt, you will eventually get your money back and you will earn interest in the process.

For all intents and purposes, you are lending money to the government when you purchase a United States savings bond. In the days of huge deficits, it is much easier for the United States government to raise money by selling US treasury bonds and savings bonds than to have to go to foreign lenders who require much larger interest rates and much higher returns on their investments. US treasury savings bonds are better for the government and the country because they do not require American citizens to pay taxes to pay foreign governments back for their loans.

Not only is this a lucrative deal for the government when it needs financial assistance, but because of compounding interest, it is also a lucrative deal for you. If you begin with a $1000 initial investment and make $50 monthly deposits, after taxes your nest egg would be nearly $20,000. Increase the interest rate by only a little bit to 3 percent and you will have a nest egg of $22,000 or more. If you think you can put away $100 a month instead of $50, your nest egg will grow exponentially to $42,000. There are also tax benefits associated with these bills that you will want to look into as well.

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Originally posted 2020-11-26 05:01:05. Republished by Old Post Promoter

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