How do savings bonds work? (Complete guide)

If you’re looking for ways to save and invest, you might be wondering: how do US savings bonds work?

This guide walks through key questions including:

• How do I Savings Bonds work?
• How do EE Savings Bonds work?
• How do 30 year savings bonds work once the 30 years is up?
• How do I cash in a savings bond?

And as a bonus, we’ll also touch on Wise - as a smart way to manage your money if you need to hold, send, spend, exchange or receive payments in foreign currencies.

What is a savings bond?

When you buy a US savings bond you’re lending money to the US government. In return, the government promises to pay your money back when you redeem your bond, including interest at an agreed rate, and subject to meeting eligibility criteria.

All of the details in this guide are correct at time of writing, 31st May 2023 - older bonds, or future issued bonds in any series, may have different terms.

How do savings bonds work?

The US government has been issuing savings bonds since 1935. Sometimes bonds were issued for general funds, and sometimes for specific purposes, such as to fund the Post Office or to contribute to the Armed Services. Different bond series have their own features and benefits - the bonds being issued today are in Series I and Series EE. Bond Series HH was stopped in 2004, but these bonds earn interest for 20 years, so some are still active now.

Today, you can buy savings bonds from as little as 25 USD, and - depending on the series you hold - they’ll earn interest for up to 30 years. You can cash in your savings bonds earlier than the 30-year deadline, but it’s worth remembering that if you cash in the current bond series (Series I and EE) within 5 years, you’ll lose the last 3 months of interest you earned.

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Types of savings bonds

At the time of writing, the US government is issuing bonds in 2 series: EE Bonds³ and I Bonds⁴.

EE Bonds issued today have a fixed rate of interest but come with a guarantee that they’ll double in value over the course of 20 years. You can only get electronic EE Bonds, to a maximum of 10,000 USD in value every year.

I Bonds are issued in both paper and electronic form. You can use your IRS tax rebate to buy paper I Bonds. I Bonds have a fixed interest rate plus a rate based on inflation - the overall rate is reset twice a year. You can buy up to 10,000 USD of electronic I Bonds, and 5,000 USD of paper I Bonds, annually.

How do you get savings bonds?

You can buy savings bonds most conveniently by registering a Treasury Direct account. In some cases you can also buy paper bonds - such as the I Series bonds available today.

How to cash in savings bonds?

You can cash in an I or EE Savings Bond issued today, once you’ve earned it for a year.

Electronic bonds can be cashed in by logging into your Treasury Direct account⁵. If you hold a paper bond you may be able to cash it in at your bank, or you can send it with a completed form FS1522, to claim directly from the treasury.

Learn more about how to cash in savings bonds here.

Pros & cons of savings bonds

Not sure if US savings bonds are for you? Here are some pros and cons to consider:

Pros

• Considered to be a fairly safe option for investment
• Bonds sold today start from as little as 25 USD
• Different bond types depending on what’s important to you

Cons

• Not ideal as a short term investment
• Cash in a bond issued today within 5 years and you lose some interest
• Interest rates can change

Alternatives to savings bonds

Savings bonds aren’t your only option if you’re looking to invest and grow your money.

Here are some resources which look at alternatives to savings bonds, which you might want to consider when researching the best picks for you:

• What is a Money Market Account
• Guide to Money Market Funds
• What is a CD?
• Guide to the best high yield savings accounts
• Learn about business savings accounts

Bottom line

US savings bonds offer low risk ways to put your money into an interest earning account, with different bond types available, from as little as 25 USD. However, they’re not right for everyone. As with any investment, it’s important to do your research before you buy US savings bonds, so you know you’re getting the right product for your needs. Use this guide as a starting point, and get professional advice if you’re not sure which savings and investment vehicles might suit you best.

Frequently asked questions

How long does it take for a savings bond to mature?

Series EE and Series I savings bonds issued today will continue to earn interest for up to 30 years. However, you can cash in your bond once you’ve owned it for at least a year. Cashing in having owned your bond for under 5 years means you forfeit the last 3 months of earned interest.

Do savings bonds expire?

Savings bonds don’t expire as such, but they may stop earning interest after a certain period of time, depending on the bond series you own. Treasury Direct has tools available to search for matured bonds⁶ if you think you may have some, so you can cash them in if eligible.

Do savings bonds lose money?

Savings bonds issued by the US government are pretty safe, but you’ll need to do your research to make sure you understand the risks involved. Cashing in a bond early, for example, might mean you forfeit some interest earned.

How much is a $200 savings bond worth after 20 years?

At the time of writing, the EE Bond series bonds being issued are guaranteed to double in value in 20 years - so if you bought a 200 USD bond in this series today, it should be worth 400 USD in 20 years.

However, the value of your savings bond depends on the specific bond you have - if you hold an electronic bond you can log into Treasury Direct and see the value of your bonds. Otherwise, there’s a handy savings bond calculator⁷ you can look at to calculate the value of paper bonds.

How much does a savings bond grow in 20 years?

At the time of writing, EE Bonds are being issued with a guarantee they’ll double in value in 20 years. Other bonds have their own earning rates, so the actual value of your bond over 20 years will depend on the details of the specific one you hold, and when it was purchased.