Savings bonds can be purchased directly from the U.S. Department of the Treasury through its online platform, TreasuryDirect. These government-backed bonds are available in electronic form, offering a secure way to save money while earning interest over time. While paper bonds are no longer sold at banks, certain Series I savings bonds can still be obtained with a federal tax refund. Buyers must create an account on TreasuryDirect to complete a purchase, selecting from available bond types and setting investment amounts within yearly limits. Savings bonds are non-transferable and can only be redeemed by the registered owner or a beneficiary.

There are a few different methods of buying savings bonds, but a financial advisor can help if you have specific questions.

Where to Buy Savings Bonds

In 2012, everything relating to savings bonds was switched over to an online-only platform. TreasuryDirect, the U.S. Treasury Department’s official website, is where all savings bond transactions now occur. You must create an account with TreasuryDirect to begin purchasing bonds. The site also offers automatic debits from your bank account, as well as a payroll savings plan. This plan lets you buy savings bonds directly from your paychecks on a recurring schedule.

Paper savings bonds were once available in financial institutions, including banks and credit unions. But because of the U.S. Treasury Department’s move to a virtual system, you can no longer do this. The sole exception to this rule is if you buy a Series I savings bond through your tax refund. Only then will the Treasury issue a paper bond. Redeeming your bonds is as easy as a direct deposit to your checking or savings account. Once you’re ready to go, simply authorize the redemption and the funds will be disbursed.

Types of Savings Bonds

Savings bonds come in two forms: Series EE and Series I. Series EE bonds earn a fixed rate of return. On the other hand, Series I bonds receive interest based on a combination of a fixed rate and an inflation rate that’s calculated bi-annually via the Consumer Price Index for All Urban Consumers (CPI-U).

1. Series EE Savings Bonds

As of the beginning of 2012, the U.S. Treasury Department completely eliminated paper savings bonds in an effort to save on paper and manufacturing costs. Therefore, if you want a Series EE savings bond, you’ll need to go through TreasuryDirect. Series EE bonds are only available for purchase if you have a Social Security number and be a U.S. citizen, resident or civilian employee. The value of your bond is equal to the payment you make, meaning a $200 investment gets you a $200 savings bond.

2. Series I Savings Bonds

Series I savings bonds follow the same standards as their Series EE counterparts. You customarily buy them online through TreasuryDirect with a valid Social Security number and status as a U.S. citizen, resident or civilian employee. But if you’re looking to use your tax refund to purchase bonds, the U.S. Treasury Department will grant you a paper bond. This is the only way to get paper bonds anymore, and you’ll need to file IRS Form 8888 to be eligible. Should you go this route, purchases must be in $50 increments.

3. Gift Savings Bonds

Gift savings bonds are a form of Series EE and Series I savings bonds. However, you will go through a slightly different process to gift them. Once they are in your possession, you need to make sure your recipient has his or her own TreasuryDirect online account. As soon as this is complete, you’ll be able to select the bond you want to gift and send it off. If you decide to go with a paper Series I savings bond, you must purchase it in the recipient’s name. You can buy gift bonds for anywhere from $25 to $10,000 each.

How to Buy Savings Bonds

Buying savings bonds involves a straightforward process, whether purchasing them electronically through TreasuryDirect or opting for paper bonds using a federal tax refund. Each method has its own steps, with online purchases offering more flexibility and automation, while tax refund purchases provide a rare opportunity to obtain paper bonds.

Purchasing Online via TreasuryDirect

To buy savings bonds through TreasuryDirect, start by creating an account on the official website. Once registered, log in and select the “BuyDirect” option. Choose between Series I or Series EE bonds, enter the desired purchase amount (within the annual limit of $10,000 per series), and link a checking or savings account for payment.

TreasuryDirect allows users to set up recurring purchases, allocate bonds as gifts and register co-owners or beneficiaries. After completing the purchase, bonds are held electronically in your account and can be tracked or redeemed as needed.

Buying Paper Bonds with a Tax Refund

For those preferring a physical bond, the only option is purchasing Series I savings bonds using a federal tax refund. To do this, complete IRS Form 8888, specifying the purchase amount (up to $5,000 per year) in increments of $50. The Treasury will then mail paper bonds to the address listed on the tax return.

Any refund amount exceeding the bond purchase is sent via direct deposit or check. Unlike electronic bonds, paper bonds require manual tracking and must be mailed to the Treasury for redemption. While more limited in access, this method allows savers to diversify how they hold their savings bonds.

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Benefits and Risks of Savings Bonds

Savings bonds, regardless of type, come with minimal risk. The U.S. federal government backs them – a fact that affords them ample protection. In turn, they are especially great choices for any risk-averse investors looking to pad their existing assets over the long term.

Unlike stocks or mutual funds, savings bonds are not subject to market fluctuations, making them a low-risk investment. Additionally, interest earned is exempt from state and local taxes and can be tax-free if used for qualified education expenses.

Despite their stability, savings bonds come with limitations. They have strict redemption rules, requiring holders to wait at least one year before cashing out, and withdrawals within the first five years incur a penalty of three months’ interest. Their lower return potential compared to stocks or corporate bonds may not appeal to investors seeking higher growth. Additionally, annual purchase limits cap how much can be invested, restricting their role in a diversified portfolio.

Savings Bonds Compared to Other Investments

Savings bonds fall under the umbrella of fixed-income securities. These are investments that usually come with fixed interest rates and provide consistent returns. But there is more than one style of a fixed-income security, as municipal bonds, corporate bonds and exchange-traded funds (ETFs) also fit the bill.

Savings Bonds vs. Other Bonds

Municipal and corporate bonds are slightly riskier investments than savings bonds. Although this is a general statement, it rings true, because local governments and corporations are often less reliable than an entity like the U.S. federal government. In fact, insurance companies often back municipal bonds in case of default. Furthermore, if you purchase a corporate bond with a company with a low credit rating, you are facing a higher degree of risk.

Savings Bonds vs. ETFs

ETFs are diversified baskets of investments that passively track a market index instead of trying to beat it. These funds ordinarily operate within certain verticals, such as information technology companies and energy companies or even specific bond types. These funds trade like stocks, whereas savings bonds don’t often change hands. Because of this, ETFs give you maximum flexibility.

Savings Bonds vs. Stocks

On the opposite end of the investment spectrum from savings bonds are stocks. These equity investments do not earn at a fixed rate, but rather are exposed to the ups and downs of the financial performance of a company. This chance for fluctuation illustrates that stocks have one of the strongest potentials for a high return but also for a plunge.

Bottom Line

If you’re new to investing or prefer a low-risk option, savings bonds can be a good choice for your portfolio. You can buy them via a user-friendly online process through TreasuryDirect, as opposed to other investments that typically require a brokerage account. This simplicity, combined with the ultra-low risk nature of savings bonds, makes them well worth a look.

Tips to Become a Better Investor

When thinking about what investments you could make to better meet your financial goals, consider working with a financial advisor. They can help you create a financial plan and even manage your money for you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Understanding diversification is a great first step for anyone looking to step up his or her investment game. Diversifying is the process of spreading your investments out across the market. You do this to ensure that the health of your portfolio doesn’t require the success of a specific investment type.