US Savings Bonds

Archive for January, 2009

Question: Cashing in EE Savings Bonds?

A friend of mine has US Savings Bonds (EE) purchased in the 80’s and are earning 4%. She asked me if it is wise to cash them in to pay for her son’s college tuition. If she didn’t sell the bonds, the money to pay tuition would come out of her savings, which I assume is not earning much. So what is the better choice?

Answer: There are a couple factors to consider. One is that the interest on Savings Bonds is in many cases tax-free when used to pay for education. See the link below for more information on that. Depending on your friend’s tax bracket, that could mean a significant savings on taxes by cashing them in for education.

Also, most Savings Bonds stop earning interest after 30 years, so if those bonds were bought in the early 80s, they might be close to “maturity” after which they will not earn anything.

My opinion would be that if your friend qualifies for the interest being tax-free and the bonds are close to maturity, it’s probably better to cash those in.

If she doesn’t qualify for the tax-free interest on the bonds or the bonds are from the late 80s and still have quite a few years before maturity, I personally would hold on to the bonds for exactly the reason you mentioned – that they are paying significantly more interest than a savings account is.

Another factor for some people is whether they would spend the money if it’s in the savings account. For anyone that has trouble with controlling spending, it’s probably better to keep it in the bond where it isn’t so easy to spend.

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Question: I live in Australia. I currently have 2 defaults (both fully paid) on my credit file totalling $2000.?

The 2 defaults wont be removed from my name until early-mid August 2009. Currently i am totally debt free, but having issues with gaining credit due to the 2 defaults. I am looking into buying my first home when the defaults get removed, by then i should have a significant savings to be used as bond. My question is, if i apply for a home loan in 2009, will there be a chance i may not get approved because i haven’t had a good credit history prior to applying and becuase there is no current credit on my name eg. from telco, bank loans etc. Now, whilst i wait for my home loan, should i consider a car loan (i know i wont get apporved from banks etc) from an organisation that specialisis in bad credit loans (although they are higher in interest) so that i can show the banks by the time i apply for a home loan that i am able to committ to a loan, even though i have had a bad credit experience in the past.
Your suggestions are appreciated. Thanks

Answer: I have listed a source below of mortgage companies in Australia. They all deal with bad credit mortgage loans. They can probably help you out.

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Question: Is there a good table of all of the interest rates for series EE treasury Savings Bonds going back to the 80’s

Answer: Try this page on the U.S. Treasury site:

http://www.savingsbonds.gov/indiv/research/indepth/ebonds/res_e_bonds_eeratesandterms.htm

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