Savings Bonds.?

Question

What are the pros and cons of Savings Bonds?

Answer 1

well actually i never found a real con to a savings bond but the intrest is not too hot but nice way to save for a rainy day I got EE bonds and one patriot they are a god savings item .

Answer 2

They are a good safe investment, but the interest rates aren't so great.

Answer 3

The 1st responder gave you the pros. Now for the cons.  The interest rate they pay does not keep up with inflation.  It is like you are paying the government to use your money.  Then when they finally are cashed in, you get to pay taxes on the money you did not make.  A double shafting so to speak.  They might not be the worst investment option available, but they certainly are up there near the top of the list.

Answer 4

I disagree with part of the cons listed above:  if you limit your savings bond purchases to I-series bonds, you have very little to loose and many nice benefits from investing in savings bonds up to the $5000 limit for small investors.

This should be used for "no risk" emergency money or your long term "cash is king" money.

The inflation indexing (the "I" in i-series bond) ensures that over relatively long periods of time 7-15 years you will do better than in a money market fund or rolling short term CD's.  You may not have *exact* purchasing power parity, but you should be close.

Unlike all other bonds, CD's, and cash accounts, you do not have to pay taxes on the interest earned until you actually cash the bond.  

If you keep the bonds for 5 years or more and then use the money to pay for eduction, the earnings will end up being tax free.

You do not pay state taxes on the interest paid.