Remember the propaganda posters for World War II where Uncle Sam asked for you to do your part and support the war effort? Some people sent their pantyhose in so the nylon could be used in parachutes. Food was rationed. And some people bought war bonds. Does anyone really buy bonds these days? Does anyone even know about bonds these days? Who knows! They aren’t as popular as they once were during World War II, but you can in fact still get them.
First things first, what exactly is a bond? Very simply put, a bond is a form of debt where you serve as the bank. You loan money to a company, city or the government and they promise to pay you back in full with interest payments. Typically, governments will issue bonds when they need to finance their spiraling debts. Again, think of World War II, not only the bonds help the war effort, but they also helped stimulate the economy!
Second, there is quite a variety of bonds! For instance, there are Treasury Bonds issued in terms of thirty years and interest is paid every six months. Then there are Municipal Bonds issued by states, cities, or local governments that can be exempt from federal taxes and potentially states taxes, depending on where you are. Also there are Savings Bonds issues by the U.S. Treasury, that are known to be boring, and you can redeem them a year after holding them, up to thirty years. If you’re wanting something a little riskier, then there are Corporate Bonds issued by companies; risky due to how their debt ranges from safe to risky. These are just a few options with many more out there!
Keep in mind the main thing with bonds is that you have to wait for them to mature. Once I was given a bond from a grandparent when I was a kid and thought holy cow, money! Needless to say, my parents had a fun time explaining to a seven-year-old that I couldn’t have the money until I was around thirty. That seemed like quite a long time for my childhood self!
So what do you do with your bond once it has matured and you finally get your money back? Well, whatever you want really, but as they say, investing it can be a good idea! Or you could pay for something with it, like class textbooks if you’re at school. Or you could just slap that money into your savings account. Either way, the choice is yours, but after waiting a nice chunk of time for the bond to mature, I’d want to make sure I chose my decision wisely.
Who knows, maybe bonds will make another comeback one day; hopefully from a sudden interest in them and not another World War!