Did you know that you buy US Savings Bonds with your income tax refund? You can buy savings bonds for yourself or for other people, like your grandchildren for example. Last year, you could only purchase a bond for yourself.
How do you do it? It’s really easy. If you claim a refund on your 1040, you use form 8888. It’s the Allocation of Refund form (it includes Savings Bond Purchases) to split your refund. The bonds start at $50 and you can purchase more in increments of $25 up to $5,000 worth if you want to. Any money that you don’t use for purchasing bonds will be direct deposited into your bank account.
For example: let’s say that you will get an $800 refund. You want $100 in bonds to go to each of your two grandchildren John Jones and Mary Smith. You will fill out the paperwork with their names on the form (you don’t need their social security numbers) and the remaining $600 will be direct deposited into your bank account. The US Savings Bonds will be mailed directly to your home in about 5 weeks.
The bonds will earn interest for 30 years and are tied to inflation. It’s a safe investment backed by the United States Government. They’re not just for saving for college. This could be a retirement savings vehicle if you want it to be.
You can cash the bond in after one year at most banks or credit unions if you need to. You will need to hold the bond for at least five years if you don’t want to lose the last three months of your interest though. The current interest rate is .74% and it adjusts for inflation every six months.
The best part, there’s no fee for investing in U.S. Savings Bonds.
If you’ve been thinking that you need to start saving and you just haven’t done it yet, this is a great opportunity.