Savings Bonds

[fruitbowlk]

I have a little over 2,000 worth of savings bonds that I am saving to put toward a downpayment on my house. But I would like to get some options on my thoughts.

1. cash bonds and put it towards my EF which almost have 3 months of expense.
2. Leave alone until I'm truely ready to start saving for a house. Hopefully 20% down.

I'm debt free
I'm about to lose my job in a year or two.
I'm on step 3 in the baby steps (dave Ramsey)
I would like atlease 8 months of expenses in my EF.

Also should I stop getting savings bonds all together? if so Why? I originally started getting them 10 years old for my niece and myself. Then I when I had my own child I got a few for her.

[disneysteve]

I see no reason to cash the bonds. They can still serve as part of your EF. You EF doesn't have to be sitting in cash under your mattress. It just should be in something safe. Savings bonds certainly qualify.

Since you know you will be losing your job in the near future, I'd certainly keep working on building up that EF as you may well need it depending on how long it takes you find a new job.

[kork13]

It really just depends on what you want to do with them. Whether save them for a home DP or add them to your EF, you won't go wrong either way. What type of bond are they/what rate are they earning? Look at that, and make the decision that makes sense for you. As for buying them or not, that again depends on your goals. Saving bonds can be pretty good for certain purposes, it just depends on what you want out of them.

I know from my perspective, I'm buying as much of them as I can right now (limited to $5k/yr). I'm buying I-bonds. Some of them as part of an eventual home DP (at least 3 years away, probably more), and some as a part of my EF (will eventually be about 1/2 of my EF). I like savings bonds, and figure they're a good way for some good, safe, returns.

[ken1706]

What type of savings bonds are they? I bonds or EE bonds?

If you purchased I bonds around 2000, those would be good to keep. I bonds issued back then had a fixed rate over 3%. The fixed rate in the last few years have been very low (under 1%) so they're not as good of a deal as they used to be.

[jIM_Ohio]

I would not buy more bonds if you think you are losing your job, but would also not cash any of them in. Bonds are "safe" to some degree. The bigger issue with bonds is liquidity, but if you can hold them to maturity, that liquidity risk goes away.

[YISave]

It doesn't matter what you name the bonds. It could be emergency savings or down payment on house. When you are ready to cash them out, the money will be there just like you were saving it in a bank. Someone can correct me if I'm wrong but it used to be that you earned more if you kept them for at least 5 years. I don't know if that has changed.

I purchased an EE bond for my granddaughter in 2007 at a rate of 3.40 and that is a fairly good rate today compared to other rates. Instead of a savings bond for my 2nd Granddaughter, I got a 1 year CD at 3.75. When it matured in January, I renewed it for 1 year at 1.84%. The former CD was making double of what we are getting now.

I have older savings bonds that are getting 4% and in this environment, I'm not complaining. It's good to have a mix of vehicles.

[disneysteve]

They are really only good for older people who are wanting monthly income but barely any growth. The best thing for younger people is good growth mutual funds in a strong company such as American Funds

This is incorrect. Savings bonds do not pay monthly income so they would be of no value to an older person needing a monthly check.

I'd also stay far away from American Funds. They are adviser-sold funds that carry high expenses/loads. If you want mutual funds, stick to no-load funds that you buy directly from the fund company like Vanguard, T. Rowe Price, Fidelity and many others.

[cicy33]

this is a great discussion. For someone like me, I am always interested in what there is good to invest in. I guess I thought savings bonds were only worth what you paid for them. Learn new everyday!

[YISave]

I don't think that investing in Bonds right now is a plus. Some would do it because of the promise that the govt. would back up the money.

[kork13]

I don't think that investing in Bonds right now is a plus. Some would do it because of the promise that the govt. would back up the money.

I mentioned above that I'm buying a bunch of I-Bonds. My reasoning is three-fold: a) safety -- the money is for my EF and my home DP savings; b) acceptable rate (currently 3.365%, averaged ~4% over the last 5 years); and c) inflation protection -- I see only one direction that inflation is gonna go for the next number years (straight up -- thanks, Congress), so this is a decent method to work against it.

[YISave]

I apologize to you kork13. I should have said which bonds that I was talking about. I was speaking of the EEbonds not the I bonds. The I Bonds are inflation protected.