Paper Savings Bonds Soon to Become Extinct

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Savings bondFor decades, Americans have bought savings bonds, both as an investment and as a patriotic way to support their country. But in less than two weeks, the once-ubiquitous bonds will disappear into cyberspace, and paper bonds will be no more.

As of Jan. 1, the Department of the Treasury will no longer offer savings bonds in paper form. In an effort to streamline operations, cut costs, and modernize the program, the Treasury will sell bonds solely over the Internet through its TreasuryDirect website.

The move could save the government $120 million over the next five years. And because the full slate of available bonds will still offered online, the Treasury doesn't expect any hiccups.

But Should You Buy Savings Bonds at All?

Since people have learned to go online for everything from grocery shopping to stock trading, buying savings bonds on the Internet may seem more like an overdue move than a big innovation.

However, the move does raise a different issue -- a timely one, too, given the state of the country's financial system and the fact that Social Security pays the average recipient barely a minimum-wage salary: The real question is not whether you should buy paper bonds before they go digital, but whether savings bonds -- in any form -- are worth your money.

Unfortunately, savings bonds have largely lost their desirability as an investment in recent years. As with many other savings vehicles, including bank CDs and money market accounts, savings bonds are suffering from poor interest rates.

Earnings Have Disappeared Too

Right now, regular series EE bonds earn just 0.6%, with the rate fixed for the next 20 years. The series I savings bond, which is inflation-adjusted, has its value rise and fall with the inflation rate -- but it pays no premium above that amount.

That stands in stark contrast to the situation in the past. A decade ago, I bonds paid 3 percentage points or more above the inflation rate. As recently as 2006, EE bonds paid 3.7%.

The main advantage of savings bonds is that they let you invest very small amounts of money -- as little as $25. That makes it a convenient way for even low-income workers to save. But without the competitive rates they used to have, they simply aren't a very good long-term investment anymore. Paper savings bonds may be disappearing, but that's nothing that savers should mourn.

Motley Fool contributor Dan Caplinger has some old savings bonds with better rates.


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57 Comments

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gmydogbud

Have some that were bought for me during WWII.

December 27 2011 at 10:23 PM Report abuse rate up rate down Reply
PERENNIAL RANCH

"UNITED STATES OF CHINA " HERE WE COME

December 27 2011 at 8:12 PM Report abuse +2 rate up rate down Reply
PERENNIAL RANCH

JUST LIKE THE USPS GOING UNDER, NOW THIS. WHAT NEXT ? MABEY THEY WILL MELT DOWN THE STATUE OF LIBERTY AND AND MAKE A SPECIAL ROCKET SO THEY CAN SEND ALL THE DUMB ASS POLITICIANS TO THE MOON !

December 27 2011 at 8:10 PM Report abuse rate up rate down Reply
Jetncat

PS Don't buy Bonds anymore just another govt money grab

December 27 2011 at 3:49 PM Report abuse +2 rate up rate down Reply
Jetncat

Call your congressmen and ask them why they want to destroy this American tradtion? The govt must know it is going to slow down govt investing so the real question would be WHY? I do not trust our corrupt govt or it's blood ******* politicans. Looks like I am going to stop saving for my grandkids this way.... Time to buy gold

December 27 2011 at 3:36 PM Report abuse +1 rate up rate down Reply
toeknee1104

THE ENJOYMENT IS HOLDING THAT BOND IN YOUR HAND. YOU OPEN THE ENVELOPE UP AND SEE A 100 BOND, ALL OFFICIAL LOOKING WITH YOUR NAME ON IT. I'D SAVE THEM UP LIKE BASEBALL CARDS. NOW WHAT, NOTHING BUT AN ELECTRONIC HICUP SOMEWHERE IN THE INTERNET WORLD? NO THANKS.

December 27 2011 at 10:43 AM Report abuse +1 rate up rate down Reply
tomgator

I have been buying my Grandkids series ee and series i bonds for over 10 years. I trided to due this for Christmas this year on line and found out that I could buy the bonds but I coould not set up a secondary beneficary such as their mothers as I have always done.
I went top my local bank ans sentimentally bought them the last paper Bonds.
The great minds at the Treasury Dept. from Harvard and Yale have again destroyed an American traditions !!!!!!!!!!!!!!!

December 27 2011 at 10:40 AM Report abuse +2 rate up rate down Reply
David

Just what I want on the internet, my information!!!

December 26 2011 at 6:59 PM Report abuse +1 rate up rate down Reply
Mike

Fed res dollar printing has increased to keep up with US treasury's need for them as debt buyer of last resort. Euro is doing same for their debt but doesn't hold the luxury as world's res currency. Fed exports it's inflation to the world euro can't & WILL hypor inflate to ZERO. Europ will run to the dollar as others trade for gld/slvr. Even with small demand increase gld/slvr price rise outside the fed's ability to keep suprpressed & dollar will start its final fall, world WILL panic & gld/slvr will BE only reserve currency. World fiat monotary system is collapsing & we face deep depression. Got Gold? China & India does, why's that you figure?

December 25 2011 at 5:06 PM Report abuse +1 rate up rate down Reply
1 reply to Mike's comment
jkennedy806

happy new year to you my friend i hope you are golden in 2012

December 26 2011 at 3:46 PM Report abuse +1 rate up rate down Reply
sharon

Another way to save, shot down. Its clear the U.S.Government does not what need our money or want to provide a way for Grandparents to save a little for the grandchildren.

December 24 2011 at 11:39 AM Report abuse +2 rate up rate down Reply
1 reply to sharon's comment
rgkarasiewicz

The reason is that the banking industry had lobbied Washington to eliminate the paper bonds so as to induce people to deposit their funds in their institutions instead.

December 24 2011 at 12:03 PM Report abuse +2 rate up rate down Reply