The U.S. Department of the Treasury initially created the American savings bond program in order to improve government funding for World War I. Today, this program still exists and sells two main types of bonds, issued at various denomination levels. Money spent to purchase savings bonds is deposited directly into the U.S. Treasury, but reduced spending on savings bonds over the years means that the impact on the U.S. economy is smaller.
When an American citizen purchases a savings bond through the U.S. Treasury, the money he uses to purchase the bond is deposited directly into the U.S. Treasury. Annually, Americans can spend a total of $10,000 on savings bonds, $5,000 each for both series, or $20,000 if they buy additional savings bonds online through TreasuryDirect. The money earned by the U.S. Treasury in this way is income that can be applied towards government debt. As of the time of publication, an American Forces Press article indicated that America was experiencing a budget deficit of $1.284 trillion, or 8.5 percent of the country's gross domestic product.
Types of Bonds
There are two main types of savings bonds available through the U.S. Treasury: Series EE bonds and Series I bonds. Series EE bonds are issued in denominations of $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. These bonds cost half of their face value, so a bond that reaches maturity at $1,000 will only cost $500. Series I savings bonds are issued in the same denominations but cost full face value. Series EE bonds accrue their value at a rate fixed by the U.S. Treasury, while Series I bonds are adjusted semiannually to account for the effects of inflation.
Only qualified American residents who meet certain eligibility requirements are able to purchase savings bonds through the U.S. Treasury. Eligible savings bonds buyers must possess a valid U.S. Social Security number prior to purchasing the bond. Residency requirements for owning a U.S. savings bonds are fulfilled if the buyer lives in America, is a U.S. citizen living abroad or is a civilian employee of the U.S. overseas.
Purchasing savings bonds only helps the economy indirectly, as the money used to purchase the bond may be used to cover government expenses that don't directly help the economy, such as foreign activities. TreasuryDirect reports that, in 2009, total sales for Series EE bonds were $1.341 billion, while total sales for Series I bonds were $1.555 billion. This is a small percentage of the trillion dollar budget gap experienced by the United States as of the time of publication, and a sizable drop in sales from the $22.426 billion spent on both types of savings bonds in 2005.
- TreasuryDirect: FAQs Concerning the Change in the Annual Purchase Limit for Savings Bonds
- American Forces Press: U.S. Deficit Will Shrink If Tax Breaks End: Congress; Paul Handley; August 2011
- FinAid: Savings Bonds
- Dummies.com; Buying U.S. Savings Bonds in an Uncertain Economy; Sheryl Garrett
- TreasuryDirect: EE Savings Bonds In Depth
- TreasuryDirect: Savings Bonds Sales
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