U.S. Savings Bonds

Savings bonds are also issued by the federal government and backed by the "full faith and credit" guarantee. But unlike Treasuries, savings bonds may be purchased for an investment as low as $25. Like Treasuries, the interest earned on your savings bonds is subject to federal income tax, but not state or local income taxes.

Savings bonds can be purchased from the U.S. Treasury, at banks and credit unions, and are often offered by employers through payroll deduction. But unlike most other Treasuries, savings bonds cannot be bought and sold in the secondary market. In fact, only the person or persons who have registered a savings bond can receive payment for it.

Registration takes place at the time of purchase. You are allowed to register the savings bond to a single person (single ownership), two people (co-ownership), or you can register the bond to a primary owner and a beneficiary. In the case of co-ownership, either owner can cash in the bond without the other's consent. If one of the co-owners dies, the other becomes the single owner.

For more information, see TreasuryDirect's Savings Bond FAQs. For information about how to handle savings bonds left in the wake of a death, see TreasuryDirect's information What To Do When A Bond Owner Has Died.

Smart Move Learn about the advantages and disadvantages of using savings bonds to fund college education by reading the savings bond section of FINRA's Smart Saving For College.