U.S. savings bonds are issued by the U.S. Treasury and purchased through payroll savings plans and at banks. Paper savings bonds are issued in denominations starting at $50 up to $10,000. The actual value of a savings bond will only be the face amount one time in the bond's life.
U.S. Bond Purchase Price and Interest
Savings bonds -- series EE -- are purchased for one-half of the face amount. For example, a $200 bond is bought for $100. The bond then earns interest and builds value toward the $200 denomination. The initial interest rate is unchanged until the bond is redeemed. Savings bonds earn interest every month and the interest compounds every six months. On the compounding date, the interest earned over the previous six months is added to the value used to compute the monthly interest.
Savings Bond Values
The current value of any U.S. savings bond can be determined using calculators available on the Treasury Direct website. The Tools menu provides an online calculator that gives the current value of a single bond. The website also offers the Savings Bond Wizard software, which can be downloaded and installed in a personal computer. The information for a collection of bonds can be entered into the Savings Bond Wizard and the values will be automatically updated every month.
U.S. Bond Denomination Value
Series EE U.S. savings bonds are guaranteed to reach their denomination value no later than 20 years after issue. This means the $200 bond purchased for $100 will be worth the $200 by no later than the 20-year anniversary of the bond. If a bond has not earned enough interest to double in value then, the Treasury will make a one-time interest adjustment to bring the bond up to the face value.
When to Redeem U.S. Bonds
U.S. savings bonds can be redeemed anytime after one year after the bond's issue month. Savings bonds will continue to earn interest for up to 30 years. The value calculated by the Treasury Direct online calculator is the amount the bond owner will receive if the bond is redeemed during the current month. Bond owners can continue to hold bonds after the 30 year point, but no more interest will be earned.
Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.