rtmark
LearnBonds.com

How To Earn 3.5% Interest On US Savings Bonds!

Buy an EE Series US Saving Bond
This sounds too good to be true. You must be thinking “What’s the catch?”

There is one catch, and its a big one:

You cannot redeem the savings bond until maturity (which is 20 years after the bond is issued). If you need to cash-in the bond, you will earn a measly 0.6% minus any early withdrawal penalties.

That is the only catch but there is one other limitation.

The maximum amount of EE bonds a person can purchase is $10,000 per year.

This 3.5% interest rate is not a temporary teaser rate or subject to change. However, you will not see this rate advertised anywhere on the Treasury Department website.

You will see the following statement:

At a minimum, the U.S. Treasury guarantees that an EE Bond’s value will double after 20 years, its original maturity, and it will continue to earn the fixed rate unless a new rate or rate structure is announced. If a bond does not double in value as the result of applying the fixed rate for 20 years, the U.S. Treasury will make a one-time adjustment at original maturity to make up the difference. Series EE bonds earn interest for 30 years.

Source: US Treasury Dept

When I read this statement, I thought it was odd. At the time that this article was researched (11/1/2011)  the interest rate on the EE series savings bond was 0.6%. There was no way that an interest rate of 0.6% could lead to doubling of the value of a bond in 20 years. Then, I made use of the rule of 72 to figure out how long it would take for a bond to double in value. The rule of 72 states that if you take the number 72 and divide it by the interest rate you get the number of years it will take for your money to double.

For anything earning less than 1%, it would take more than 72 years to double your money.  As this is the case, the effective interest rate on EE Series savings bonds had to a lot more than 0.60%. Using semi-annual compounding over 20 years, a $1000 bond will become $2001.60 (double in value) with an interest rate of of 3.5%.

How good is a 3.5% interest rate?

At the time this article was written (11/1/2011) that is about 1% higher than the rate a 20 Year Treasury bond is paying.  This is pretty good considering that you are getting about 33% more interest for the same level of risk.

This lesson is part of our Free Guide to Buying Savings Bonds.  Continue to the next lesson here.

 

 

Trusted & Regulated Stock & CFD Brokers

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission

Rating

64 traders signed up today

Visit Now

75% of investors lose money when trading CFDs.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
David Waring

David Waring was the founder of LearnBonds.com and has been a major contributor to the extensive library of investing news and information available on the site. Until the launch of Learnbonds.com in late 2011 there was no single site on the internet catering exclusively to the individual bond investor. This was true even though more individuals own stocks than bonds. Learn Bonds was launched to fill that gap.