NationStates Jolt Archive

Why do you like to buy savings bonds? They are free of state and local income taxes and safe and relatively easy to buy with little to no transaction costs, but their interest seems rather low. They do not seem like a good investment to me because of their low interest and liquidity. What is their appeal to you?

Yes across the board?

they don't appeal to me mainly because there used to cover up U.S debt (and thus your money has already been spent) and also because if I was going to trust anyone it certainly wouldn't be the U.S government *pays lend lease costs from 60+ years ago*

Call to Power, The US government has the best credit in the world. There is no bond safer on Earth. The US government (and its citizens) does some dumb things with its money but it (like most Americans) takes its credit ratings seriously.

I just cannot see why people buy them when you can get a better return with corporate bonds and stocks.

It is said that we fear the unkown. Perhaps I am afraid of savings bonds because I do not fully understand them. Do you need to hold onto them for a few years or else there is some sort of a penalty? I do not know what coupon means or maturity or any of that stuff. I am kinda of a big dummy when it comes to bonds.

The in-laws and the older relatives always give my kid bonds on her birthdays. By the time they mature, she will have a "reasonable" amount of money for college.....

An aunt bought me a savings bond when I was a baby, thinking I'd be able to use it to buy a car when I grew up.
It was worth $80 when I cashed it in. I bought a skateboard.
Savings bonds are good for avoiding taxes and as a hedge against inflation only. If you have money to invest, have a broker help you with a portfolio.

The in-laws and the older relatives always give my kid bonds on her birthdays. By the time they mature, she will have a "reasonable" amount of money for college.....

No she won't, because college tuition rises faster than those bonds rise in value.

No she won't, because college tuition rises faster than those bonds rise in value.

*shrugs*

It paid for my wifes 4 year.

You had 80$

My girl has passed $8000 in purchased bonds and she is only 5.

--edit---

As I think about it. I am guessing your bond was $50.....

There are better investments. If someone is going to pay me to use my money in a dubious and unethical fashion I go for the ones who pay me best.

*shrugs*

It paid for my wifes 4 year.

You had 80$

My girl has passed $8000 in purchased bonds and she is only 5.

--edit---

As I think about it. I am guessing your bond was $50.....


There are several different kinds. Some continue to earn interest, others stop.
I took mine to the manager of my bank- he ID'd the ones that had stopped earning, cashed them and we put them into my IRA.
The others that continue to earn keep going. And, they are insured.

Part of a solid investing foundation. No risk, modest return.
Plus, a small investment in the country you love.

There are several different kinds. Some continue to earn interest, others stop.
I took mine to the manager of my bank- he ID'd the ones that had stopped earning, cashed them and we put them into my IRA.
The others that continue to earn keep going. And, they are insured.

Part of a solid investing foundation. No risk, modest return.
Plus, a small investment in the country you love.

Don't get me wrong. I wasn't suggesting they in themselves will do all that.

In my wifes case, they too appreciated for awhile and then stopped. Her mom then cashed them out and invested in other things.

It was free money so I won't say they are completely worthless. ;)

Bonds are great for people who will never really be savvy about investing.

Don't get me wrong. I wasn't suggesting they in themselves will do all that.

In my wifes case, they too appreciated for awhile and then stopped. Her mom then cashed them out and invested in other things.

It was free money so I won't say they are completely worthless. ;)

Bonds are great for people who will never really be savvy about investing.

Nope- I wasnt disagreeing with you-just adding to your theme.

They are safe, and often given as a gift.

In recent years, I have given my children and nephews stock DRP accounts when they were born.
Then, at holidays and birthdays, I send a check to the DRP account.

Some day, they will appreciate the years of contributions worth far more than crappy toys or clothes.
Especially the GE stock, which have split more than once in 10 years and consitantly pay a dividend, that is rolled over into new stock purchase automatically.

I'm no expert by any means, just lucky and take some advice from my father, who makes more income from dividends than his pension and social security combined.

I hate saving bonds. I only buy war bonds. We cant let the huns win!

My girl has passed $8000 in purchased bonds and she is only 5.



Okay, so by the time she's old enough for college, she'll have $32k. I'm sure you want the best for your child, so let's look at 4 years of tuition at a university.
Currently, one year costs (tuition plus books and living expenses) more than what she'll have 13 years from now: $33,301
First Year Projected Costs: $80,250.25
Second Year Projected Costs: $85,867.77
Third Year Projected Costs: $91,878.51
Fourth Year Projected Costs: $98,310.00

Total Projected Costs: $356,306.53

Okay, maybe state school is the place for your little girl. If you could send her right now, she could do one year easily: $16,357
First Year Projected Costs: $39,417.83
Second Year Projected Costs: $42,177.08
Third Year Projected Costs: $45,129.48
Fourth Year Projected Costs: $48,288.54

Total Projected Costs: $175,012.94

Umm, yeah... An Associate's Degree is good enough, right? Two years at a state school right now is only $12,294 per year. That's enough, if you had the money and she could enroll right now.
First Year Projected Costs: $29,626.63
Second Year Projected Costs: $31,700.50

Total Projected Costs: $61,327.13

Hmmm... maybe instead of college, you should just buy her a car? Then she could drive to her job at Wal-Mart.

Simple – they are very secure, highly liquid, and can be purchased tax-free.

It is pretty easy to setup a small allocation of funds (say $50 from each paycheck) to get diverted into savings bonds. The money is taken out pre-tax.

Bonds do not pay very much in the way of interest, but they can be cashed in very easily. As with most investments, you have to take liquidity into account and accept a trade-off between higher returns and ease of disposal.

The higher the risk and the longer the term, the better your return.

Personally, I would suggest you put every dollar you can into your IRA (or whatever). In the long run it will help you out a lot more (and employer contributions are nice too).

Investing in mutual funds and such leave you vulnerable to the stock market – my parents lost a substantial amount of money from their retirement accounts when the tech bubble burst and couldn’t retire as planned. Every investment is a risk – the higher the risk, the higher the return.

As a matter of having a well diversified portfolio, keeping some bonds is a wise thing to do.

I dislike bonds because they have a very low rate of return and are more suited to old people about to retire who are worried about losing all their money on risky investments like dot-coms or IPOs or REITs or something.

For those of us still plenty young enough to have time to put our money in growth areas (vice income areas), bonds have little place in our portfolios.

But as I said, it's only my opinion.

An aunt bought me a savings bond when I was a baby, thinking I'd be able to use it to buy a car when I grew up.
It was worth $80 when I cashed it in. I bought a skateboard.
Savings bonds are good for avoiding taxes and as a hedge against inflation only. If you have money to invest, have a broker help you with a portfolio.

Sort of. It must have been a $50 EE bond (bought for $25) back in the day.

EE bonds cashed for educational purposes aree not taxed. And, since you buy them at half face value, you're at least going to double your money upon maturity. That's not bad for something with zero risk.

I bonds are indexed for inflation, but are bought at face value. Right now, I have one that is earning 9.1% since 1998. Not too shabby, that! :)

While I certainly wouldn't put a LOT of money into gov't bonds, but I do suggest keeping 5-10% in them as a "sure bet" for retirement. If they ever become worthless, there are no dollars anyway.

I dislike bonds because they have a very low rate of return and are more suited to old people about to retire who are worried about losing all their money on risky investments like dot-coms or IPOs or REITs or something.

For those of us still plenty young enough to have time to put our money in growth areas (vice income areas), bonds have little place in our portfolios.

But as I said, it's only my opinion.

I disagree. Gov't bonds are a terrible choice for those about to retire... they're going to NEED money, not invest it for 30 years when they're already 65.

Yes, there are better ROIs out there, but they all carry some risk. Keeping a small "hedge" of US bonds is a good idea, IMO. "EE"s are good vehicles for college, and "I"s are good as a safe investment.

I disagree. Gov't bonds are a terrible choice for those about to retire... they're going to NEED money, not invest it for 30 years when they're already 65.

Yes, there are better ROIs out there, but they all carry some risk. Keeping a small "hedge" of US bonds is a good idea, IMO. "EE"s are good vehicles for college, and "I"s are good as a safe investment.

True enough. (I admit my error on the retirees, just trying to say they should have a much larger percentage of their money in much safer investments.) I didn't say they have *no* place in my portfolio, though. :) Just very little -- around 6% according to Microsoft Money.

It makes me feel like I'm wasting my money, though. I mean, I budget and save, forgo all the major purchases that seem to be a prereq for modern society, save and invest everything extra. Lowest rate of return makes me feel like I'm wasting my time. But, like I said, it's only my opinion. :D

True enough. (I admit my error on the retirees, just trying to say they should have a much larger percentage of their money in much safer investments.) I didn't say they have *no* place in my portfolio, though. :) Just very little -- around 6% according to Microsoft Money.

It makes me feel like I'm wasting my money, though. I mean, I budget and save, forgo all the major purchases that seem to be a prereq for modern society, save and invest everything extra. Lowest rate of return makes me feel like I'm wasting my time. But, like I said, it's only my opinion. :D

:cool:

True. But then, those that put everything into Enron wish they had it now, eh? ;)

:cool:

True. But then, those that put everything into Enron wish they had it now, eh? ;)

Yeah, I'm sure they do. LOL. Diversification is our friend.

Yeah, I'm sure they do. LOL. Diversification is our friend.

And if diversification is our friend, his brother is dollar cost averaging.

And I have to add- start as early as possible.

If I could go back to 17 yrs old and set aside 10% of my earnings, I'd be doing much better right now. If you were smart and started planning reasonably for retirement when you started earning money, you could reasonably plan to retire in your 50s.

And if diversification is our friend, his brother is dollar cost averaging.

Indeed. :cool:

Call to Power, The US government has the best credit in the world.
Actually, the US government is bankrupt. It doesn't have enough to cover the debts, which is why it issues fiat currency. Such is the case with all countries which use fiat currency. The problem can be made even worse if a number of debts are called in at once, giving rise to a hyperinflation such as seen in Zimbabwe.

Actually, the US government is bankrupt. It doesn't have enough to cover the debts, which is why it issues fiat currency. Such is the case with all countries which use fiat currency. The problem can be made even worse if a number of debts are called in at once, giving rise to a hyperinflation such as seen in Zimbabwe.

This is only somewhat true: the US government doesn't back it's money in specie, true. Few countries do these days. But the US does have an awful lot of assets. It's far from bankrupt.
Further, specie standards have their own problems, not the least of which is that the currency is boom-bust based on external factors.

This is only somewhat true: the US government doesn't back it's money in specie, true. Few countries do these days. But the US does have an awful lot of assets. It's far from bankrupt.
Those assets would not cover the debts.


Further, specie standards have their own problems, not the least of which is that the currency is boom-bust based on external factors.
Mmmmhmmm. That can really happen when a currency unit is defined as a specific weight of gold/silver. Yeah. Can happen all the time. Sure.

Those assets would not cover the debts.

Depends on what a Seawolf actually retails for, no?

Mmmmhmmm. That can really happen when a currency unit is defined as a specific weight of gold/silver. Yeah. Can happen all the time. Sure.

It has done so throughout time. The panics of 1819 & 1896 come to mind.

Depends on what a Seawolf actually retails for, no?
Calculate depreciation.


It has done so throughout time. The panics of 1819 & 1896 come to mind.
Quite rare in comparison to the government-caused panics/hyperinflation.

And frankly, the panic of 1819 was mostly a result of the loans caused by the War of 1812, resulting in suspension of specie payments in some areas in 1814, allowing for the initiation of frac-reserve in those areas.

A read of Murray Rothbard's Panic of 1819 (http://www.mises.org/rothbard/panic1819.pdf) should set you straight.

Am I the only one who read the topic as why buy saving bombs? :p

Calculate depreciation.

Ah yes. Because there the feds might get stuck trying to compete in the international stealth bomber or aircraft carrier markets, right?
Seriously: the idea of going back to a specie currency is just plain impossible. The amount of damage that would occur in such an economy would be astronomical.

Quite rare in comparison to the government-caused panics/hyperinflation.

And frankly, the panic of 1819 was mostly a result of the loans caused by the War of 1812, resulting in suspension of specie payments in some areas in 1814, allowing for the initiation of frac-reserve in those areas.

A read of Murray Rothbard's Panic of 1819 (http://www.mises.org/rothbard/panic1819.pdf) should set you straight.

You mean the massive hyperinflation that's occurred since the US got off the gold standard? :rolleyes:

A panic which would not have occurred at all if the US had been on a fiat currency at that time.

Ah yes. Because there the feds might get stuck trying to compete in the international stealth bomber or aircraft carrier markets, right?
Seriously: the idea of going back to a specie currency is just plain impossible. The amount of damage that would occur in such an economy would be astronomical.
The damage needs to be done.


You mean the massive hyperinflation that's occurred since the US got off the gold standard? :rolleyes:
I'm thinking like the non-gold-standard hyperinflation in Poland, Weimar Germany, Hungary, Yugoslavia, Revolutionary France (I especially love the idea of the death penalty for anyone making a price-difference between a gold/silver livre and a paper livre. That was a great touch.), and currently in Zimbabwe. Among others that have happened.

I'd love to see a denial that such happened/is happening. 'Twould be funny.


A panic which would not have occurred at all if the US had been on a fiat currency at that time.
Mmmhmmm. Nice attempt to dig the government-created problem out of the hole. Won't work, though.