One of the safest types of investment is the savings bond. Originally created during WWII, they are issued by the United States Department of the Treasury, and it is this backing which makes them so safe to invest in. The government uses these bonds to pay for the money it needs to borrow.
There are three main types of savings bonds. These include:
Series EE Bonds: These bonds cost half the price of their face value, but you are limited to $5,000 worth of them per year. Although designed to reach their face value in 17 years, they take 30 years to fully mature, during which time they accumulate interest and increase their value. At the end of this period, you receive the money you originally paid for the bonds, plus the interest they acquired.
Series HH Bonds: These cost their full face value, unlike the Series EE Bonds, but you can purchase as many as you wish. They are available in $500 to $10,000 increments, and can only be purchased with Series EE bonds, Savings Notes, or earnings from other Series HH Bonds. These bonds mature in 20 years, and do not increase in value. They stopped being issued in 2004, but there are still many remaining which have not yet matured.
Series I Bonds: Costing the same as their face value, these bonds accrue interest on a variable rate which depends upon the inflation index. There is a $5,000 limit to the amount you can purchase per year, and a penalty equal to three months’ interest if you redeem the bond within five years of purchase. They take 30 to fully mature.
Savings bonds are state and local tax exempt, and are replaceable if lost or stolen. Interest earned is often lower than that of some of the more risky investments, but the security of this type of investment makes it a good option.