3 Tips For Buying US Saving Bonds & Earning Extra Interest

savings bondTip 1: Buy At The End Of The Month, Cash-In At The Beginning Of The Month

You will earn an extra month of interest! Both I and EE saving bonds are issued the first of the month in which they are purchased. In you purchase them on the last business day of the month, you will receive interest as if you bought them the first day of the month.

However, interest is always paid the first day of the month. If you cash-in your bonds two weeks into the month, you will not receive any further interest payments and will miss re-investing the money for those two weeks. Bottom line, if you buy a savings bond the last business day of the month and cash it in the first business day of the month, you will be getting an addition month of interest for free.

Tip 2: Check To See If Interest Rates on the 10 Year US Treasury Have Moved, If You Are Thinking About Buying In April or October.

Interest rates for the EE savings bond and the fixed rate component of the I bond are set on May 1st and November 1st. For the EE bond, the rate is based upon (but somewhat lower than)  the 10 Year Treasury note. Because you can compare the rate on 10 Year US Treasuries today to the rate six months ago , you can effectively choose the higher rate by either purchasing the savings bond in April or October, or waiting a couple weeks for the rate to change.

Tip 3: When You Have Several Bonds To Redeem, Keep In Mind:

  • ┬áRedeem all savings bonds which are over 30 years old. They have stopped paying interest.
  • The different bonds you are considering redeeming may be paying different interest rates, you might want to keep the highest interest paying bond rather than the oldest which may be paying a lower rate of interest.
  • EE bonds when held for 20 years are guaranteed to double in value. This guarantee makes the effective interest rate when held to maturity approximately 3.5%. In other words, if your EE bond pays less than 3.5% and is close to maturity, try not to cash it in.

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