Savings bonds are now as popular as VCRs
Once the go-to gift for birthdays and graduations, savings bonds appear to be facing extinction.
This post comes from Krystal Steinmetz at partner site Money Talks News.
U.S. savings bonds are on the endangered list.
They were once a go-to gift for graduations, birthdays and weddings. Now, nearly a century after they were first introduced, U.S. savings bond sales have nosedived.
CNN Money said the sale of savings bonds topped 40 million in 2000. Last year, just 400,000 were sold.
There are two primary reasons that savings bonds are seemingly on the verge of extinction. According to CNN Money:
- Low interest rates. "The interest rates are so low these days that people just don't even get involved in them anymore," says Jim Moore, a Wells Fargo financial adviser based in St. Louis. Savings bonds sold near the end of 2013 were generating just 0.1 percent interest. The fixed-rate EE bond is a bit better, yielding 0.5 percent interest for the next 20 years. Bonds aren't the attractive investment they once were.
- Online sales. If video killed the radio star, the Internet killed savings bond sales. In 2012, the U.S. quit selling paper bonds over the counter. Instead, people were forced to purchase savings bonds online, and the paperwork was cumbersome, CNN Money said. Sales plummeted soon after the paper bonds were phased out.
Do you have a stack of savings bonds Grandma and Grandpa gifted to you? Chances are, the bonds have stopped earning interest, and you can cash them out. According to Investopedia.com:
Series EE bonds, the common variety first issued in 1980, were designed to pay interest for up to 30 years. So any bonds dated 1984 or earlier will have stopped paying by the end of 2014. At that point, their value is frozen, so there is no reason other than nostalgia to hang onto them. Instead, you can cash them in and put the money to more productive use.
The U.S. Treasury Department told Investopedia that billions of dollars in savings bonds have quit earning interest, but have not been redeemed. If you have savings bonds lying around, you can check their value by clicking here.
Do you have savings bonds that you need to cash in?
More from Money Talks News
Boy what a bunch of jerks that are ruining our country, Thanks idiots
I never let them mature. I always got whatever I could out of them so I wouldn't have to keep track of a little certificate for 30 years to get money that's worth less than was was used to buy it.
I get 1.5% on my checking account. Why would I put my money anywhere that gets less than that?
Can you say "Quantative Easement"?
Interest rates 0 Inflation according to the Obama supporters is nearly non-existant, actual inflation growing every day.
I hope you feel stimulated now.
The last EEs that will pay ~4.7% APR will be earning for another eight years or so, before they no longer earn interest. For those who aren't youngsters, don't say you weren't warned. Even a Newsweek columnist, in a late 1992 column, noted that they were a pretty sweet deal--that was about to end. The advice wasn't quite "Buy now or be locked out of the market forever!" (so to speak), but it was pretty clear.
At 30 years, 1992 EEs can be tendered for just at four times what was paid for them--a four-bagger. Not bad for a virtually no-risk investment. As with so much of American life, they are sorely missed today.
U.S. Savings Bonds? Sure, I recall being signing up to purchase those bonds - way back [Vietnam War days] during my Army Basic Infantry Training course at Fort Gordon, Ga. All it took to convince me, and everyone else in my recruit class to purchase the bonds was the sight and sound of a HUGE Black Drill Sergeant [like Michael C. Duncan BIG] climbed up on a podium, ordered us TERRIFIED recruits to fall in formation, and him holler : “”WHO HERE...DOES NOT...I REPEAT... DOES NOT...WANT TO BUY U.S. SAVINGS BONDS!?!”” LOL (Now) no one DARED raise their arm. His parting remark: - “”NOW THAT'S WHAT I LIKE – ONE...HUNDRED...PERCENT PARTICIPATION!””
Same thing happened during Blood Donation Drives, to wit; “”WHO HERE... DOES NOT...REPEAT...DOES NOT... WANT TO DONATE BLOOD!?!”” Result: See parting remark above.
The article ignores I Bonds. They are bonds that pay a fixed interest rate, plus a rate based on the rate of inflation that adjusts every six months. The fixed rate is currently really lousy, 0.1%, but if you bought them in 2001, or before, the fixed rate was 3%. The current total rate is 1.94% for bonds you buy today. For those of us fortunate enough to buy them in 2001, the total current rate is 4.84% Not great, but if inflation picks up, the rate will go up. If we see deflation, the bonds don't go down, they just pay 0% interest for that period. That has only happened once since 2001, for a six-month period the bonds paid 0%, after the economy tanked in 2009.
Drawbacks to I bonds: You can't withdraw your money for one year. After that, if you take out your money less than five years after you purchased the bond, you give up the most recent 3 months interest.
Tax advantage: If you use I bonds for qualified college or other educational expenses, the interest is not taxable.
""... Sure, I recall signing up to purchase those bonds...""
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
You don't always have to sacrifice quality when you buy secondhand.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'