What are EE Cash Bonds?

EE Cash Bonds, also known as Series EE savings bonds, are a type of government bond that can be purchased directly from the U.S. Department of the Treasury. These bonds are a popular investment option for individuals looking to save money for the long term.

With EE Cash Bonds, you lend money to the government for a fixed period of time, typically 20 years. During this time, the bond earns interest, which is added to the bond's value. At the end of the 20-year period, the bond reaches its final maturity and stops earning interest.

One of the key benefits of EE Cash Bonds is that they are backed by the full faith and credit of the U.S. government. This means that they are considered to be one of the safest investments available. The interest rates on EE Cash Bonds are also guaranteed to be competitive, making them an attractive option for risk-averse investors.

How to Purchase EE Cash Bonds

Purchasing EE Cash Bonds is a straightforward process. You can buy them online through the TreasuryDirect website or by using your tax refund. You can also buy them as a gift for someone else, such as a child or grandchild, to help them start saving for their future.

When purchasing EE Cash Bonds, you have the option to buy them at face value or at a discount. Buying them at face value means that you pay the full price of the bond, while buying them at a discount means that you pay less than the face value. Regardless of the purchase price, the bond will still reach its full value at maturity.

The Benefits of EE Cash Bonds

EE Cash Bonds offer several benefits that make them an attractive investment choice:

• Low risk: As mentioned earlier, EE Cash Bonds are backed by the U.S. government, making them a low-risk investment.
• Competitive interest rates: The interest rates on EE Cash Bonds are updated every six months and are typically higher than the rates offered by traditional savings accounts.
• Tax advantages: The interest earned on EE Cash Bonds is exempt from state and local income taxes. Additionally, if the bond is used to pay for qualified higher education expenses, the interest may also be exempt from federal income taxes.
• Flexible terms: While the bond reaches its full value after 20 years, you have the option to cash it in earlier. However, if you redeem the bond within the first five years, you may forfeit some of the interest earned.

Considerations When Investing in EE Cash Bonds

While EE Cash Bonds offer many benefits, there are a few considerations to keep in mind:

• Long-term commitment: EE Cash Bonds have a 20-year maturity period, so it's important to be comfortable with tying up your funds for that length of time.
• Interest rate risk: The interest rates on EE Cash Bonds are subject to change every six months. If rates rise, the bond's return may be lower than other investment options.
• Tax implications: While the interest earned on EE Cash Bonds is generally exempt from state and local taxes, it is still subject to federal income taxes. It's important to consult with a tax professional to understand the specific tax implications for your situation.

Overall, EE Cash Bonds can be a valuable addition to your investment portfolio, providing a safe and reliable way to save for the future. Whether you're saving for a child's education or planning for retirement, EE Cash Bonds offer a low-risk option with competitive interest rates.