One of my first methods of investing money began when I was born: buying savings bonds. Okay, technically it wasn't my money yet; my grandparents started buying savings bonds for me. *chuckle* They did the same for my cousins, and I don't know about them, but I sure learned how handy bonds can be.
If you're a young Workerette just starting out in your career and trying to figure out what the heck to do when it comes to investing your funds, you may want to consider savings bonds. Same thing goes for you gals who may have had to rebuild after a division of assets during a divorce - been there, done that!
Now, I know that the big dog investors may scoff a bit at this, because bonds are low-risk and may not make you rich. They are, however, a pretty safe investment option as per the folks over at The Motley Fool. And who knows, they could make you rich someday, if you hold onto 'em long enough.
There are multiple options when it comes to bonds. Here's the basic run-down:
- Series EE Bonds: Replaced the Series E bonds. As of 2005, they have a fixed interest rate which recently clocked in at 3.5%. They pay interest for 30 years and you can invest up to $30,000 in them per year. (If you're investing that much in bonds, throw some my way, okay? haha)
- I Bonds: These are Inflation Bonds, meaning that their return is a combined fixed rate (established when you buy them) and a floating rate (adjusted every 6 months). As with the EE bonds, you can invest up to $30,000 a year.
- TIPS: Technically these aren't bonds; they are Treasury Inflation-Protected Securities. Folks looking for security and not averse to slow growth buy them for the same reasons as bonds, though. With TIPS you're looking at a fixed interest rate, with a principal adjusted for inflation. The interest is based on the inflation-adjusted rate, so you're looking at more interest than if it were on your initial investment. Woohoo!
Talk to your financial advisor to see if bonds are right for you. You can also dig deeper by heading to the source: the government. If you decide bonds are the way to get your portfolio started, you can purchase them at your local bank or credit union or online through the Treasury. Many employers also offer a bond-purchasing option through the payroll department - this is how I bought them for years. Who knows? You may buy a brand new car for yourself some day with bonds and interest. It's been known to happen in my family!
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