Smart SpendingSmart Spending

Savings bonds are now as popular as VCRs

Once the go-to gift for birthdays and graduations, savings bonds appear to be facing extinction.

By MSN Money Partner Jun 19, 2014 1:51PM

This post comes from Krystal Steinmetz at partner site Money Talks News. 


Money Talks News on MSN MoneyU.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:


U.S. savings bonds © Corbis, SuperStock

  • 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

20Comments
Jun 19, 2014 3:06PM
avatar
Everything that our government has screwed with the past 40 years is now worthless. Just like every last one of our elected officials in Washington.
Jun 19, 2014 4:10PM
avatar
I inherited a lot of savings bonds and they were all at maturity; after taxes that I had to pay, there really was not much value left. These should be tax free.
Jun 19, 2014 2:59PM
avatar
There is no substitute for that Government Printed paper note stashed away that states the value and type of bond you have. Doing it on the internet leaves the customer with nothing they can hold in safekeeping like the old days. That was one move which backfired on the Treasury, they really need people to buy bonds in order to finance government operations.
Jun 19, 2014 4:00PM
avatar

Boy what a bunch of jerks that are ruining our country, Thanks idiots


Jun 19, 2014 3:09PM
avatar

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?

Jun 19, 2014 3:34PM
avatar
There is no reason to buy savings bonds. The Government like GM and Chrysler is toxic but not an asset.  When faced with staggering  debt they can't afford to pay interest. In fact they can screw up a one car funeral.
Jun 19, 2014 4:21PM
avatar

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.

avatar
I can think of other things facing Extinction too...........Founding Fathers are probably pissed at their Children.....
Jun 19, 2014 5:35PM
avatar
HMM LONG WAIT -LOW RETURN--HMMMMM NO BRAINER NEVER GET ONE! AND YOU PAY TAX ON IT!
Jun 20, 2014 12:58PM
avatar

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.

 

Jun 19, 2014 7:11PM
avatar

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.


Jun 20, 2014 12:20PM
avatar

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.

Jun 19, 2014 7:13PM
avatar

Oops


""... Sure, I recall signing up to purchase those bonds...""

Jun 22, 2014 5:15PM
avatar
Not surprising at all given how low the yields are.  Speaking of which, I don't get why no one includes life insurance in a dividend discussion ever. I have a policy from Life Ant Insurance that pays me 4-5% per year in dividend payments, and there are a few advantages from my perspective:

1. You can keep them in the policy, they grow tax deferred, and it increases your net compound growth rate.
2. They are backed by insurance companies, which the responsible ones made it through the financial crisis better than some countries debt.
3. You actually also get life insurance protection, so you can protect your family at the same time (and make them rich if you die which hopefully won't happen but at least its protection).

Why it isn't ever mentioned at least seems a bit one sided.
Jun 20, 2014 9:29AM
avatar
I NEVER buy savings bonds and asked my parents not to buy them for my children. I will NEVER support our government going deeper into debt.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

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

Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.

VIDEO ON MSN MONEY

TOOLS

More