Easy to Acquire and Hold

• Savings bonds, which are non-transferable securities issued by the United States Treasury Department, provide financial gain to the bond holder through interest. Savings bonds can be purchased through most major banks and credit centers or directly from the United States Treasury Department. They are available in a variety of denominations and accrue interest for the length of time they are held. Savings bonds can either be cashed after a specific holding period or held until they mature, which is typically thirty years from the date of purchase.
  
  

Financial Gain through Interest Earned

• The government pays the holder of savings bonds interest in exchange for using the value of the bond as a source of funding. The amount of interest paid depends on several factors, including general economic conditions, the date of purchase and whether the rate is guaranteed, based on a fixed scale or tied to the market. Because savings bonds are backed by the government, any risk of default is extremely small, making savings bonds a safe form of investing.
  
  

Tax Benefits

• Savings bonds are subject to federal income taxes, which can be paid annually or deferred until a later time. The interest income on bonds can be claimed when the bonds are redeemed or upon their maturation. This means that anyone purchasing savings bonds can delay claiming income until a point in the future when it is more convenient or financially wise to do so. Savings bonds can also be used to pay for certain higher education expenses, which may qualify the purchaser for the Educational Tax Exclusion. Interest earned on savings bonds is also exempt from state and local income taxes, which can be a considerable tax savings for some people.
  
  

Effects of Inflation

• Due to the low risk associated with savings bonds, the return is relatively small. Earnings on savings bonds can be reduced by inflation, but some savings bonds can be purchased that include a hedge against inflation, which enables the purchaser to earn more during times when inflation is high and less when inflation is low. The result of inflation on savings bonds depends on the specific type of bond purchased.