Make Money With Government Bonds

August 3, 2012 by: 0

When you invest in bonds, you are making an investment into the government of your country. You can make money with government bonds over a particular period of time that is usually fixed. For example, if you decide to buy U.S savings bonds, you are giving a low-risk loan to the American government for a fixed period. It is a very good way to make money and also provide financial support to your beloved country. A good understanding of U.S savings bonds will enable you to make more money out of your investment.

Choose The Right Type Of Bond

There are different types of government bonds. Therefore before you can make money with government savings bonds, you have to choose the type of bonds that you want to buy. The interest rate of EE type of bonds is fixed over a period of thirty years. On the other hand I-series saving bonds have the same fixed rate but provide an additional adjustment for inflation every six months.

Keep Good Records

It is vital to keep track of the government savings bonds that you buy so that you can redeem them the moment they stop earning interest. At this point, you may decide to still keep the money in saving bonds by reinvesting them. Do not cash all your U.S. saving bonds at the same time or even within the same year. If you do this, you will be lifted into a higher tax bracket and you will have to pay more tax. If you cash them over a number of years, you will be able to avoid this extra taxation.

Be Patient

Do not be in a hurry to cash your savings bonds. If you want to make money with government bonds, you have to be patient. If it is possible, let them get to the maximum maturity before they are redeemed.  You are permitted to cash in your bonds after the first one year but this will not give you much profit. The interest compounds every month so you stand a chance to make more money if you let the bonds get to the maximum term.

You can get a lot of information about government bonds on the website of the U.S. Treasury Department. You can also use this resource to monitor the value of the bonds that you have. If you have I-series bonds, you should regularly check how they are being affected by inflation rates. If the effect of inflation rates is negative, you can decide to switch to fixed rate EE bonds which will enable you to make more profit.

The money that you make from government bonds can help you to take care of major financial expenses in the future. If you use your earnings to pay for the college tuition of your kids, you can avoid paying taxes. This is one of the advantages that you have when you make money with government bonds. If you presently have savings bonds, make sure you check the Treasury Department website to make sure that they are still earning interest.

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