Series EE bonds are US savings bonds that are considered very safe investments. More people invest in Series EE bonds when the economy is bad (like it is today) and the market is unpredictable. Investors with low risk tolerance prefer to put money in series EE bonds than to risk it in the volatile stock market.
The interest rate that series EE bonds pay is very low. For example, they pay 1.40% interest fixed rate in 2008. Series EE bonds that were bought in May of 2005 and afterwards will earn a fixed rate of return whereas series EE bonds bought between May of 1997 and April 30, 2005 will earn interests based on the current market rates.
Buying series EE bonds is easy. The US Treasury Department has made it possible to buy them online through a governmental website. However, you can still buy series EE bonds at your local financial institutions or banks. Many employers also offer the option of buying series EE bonds through payroll deduction programs.
The smallest amount of money you need to invest in series EE bonds at a time is $25. If you buy paper series EE bonds, your $25 will buy a $50 series EE bond. However, if you buy electronic series EE bonds, your $25 will only buy a $25 series EE bond.
The pricing of series EE bonds differs when buying paper series EE bonds or electronic series EE bonds. Paper series EE bonds are sold at discount. You only pay 50% of the face value of the series EE bonds you buy if you don't buy electronically. For electronic series EE bonds, you pay full price.
Series EE bonds, like other bonds, should be held long term. The shortest time you must hold series EE bonds is one year. After that you can redeem them. Interests on series EE bonds, however, accumulate for 30 years but early redemption is possible.
If you redeem series EE bonds before 5 years after purchase, there is an interest penalty. The interest penalty for early redemption of series EE bonds is the most recent interest payments for 3 months. If you redeem series EE bonds after 5 years, there is no penalty.
Although the interest payments on series EE bonds are low, investors still like to invest in series EE bonds because of the safety and ease of investing. The small face values make it possible for new investors to invest a little at a time. But most importantly, becuase of their high level of safety, people purchase series EE bonds for education savings as well as retirement planning.