What a savings bond account is and who can open one

A savings bond is a loan you make to the government or a corporation. You give them money upfront, they promise to pay you back with interest after a set period of time. A savings bond account is straightforward where you hold and manage these bonds — it's not a bank account in the traditional sense, but rather a record of what you own.

The two most common types are U.S. Savings Bonds (issued by the U.S. Treasury) and corporate bonds (issued by companies). For someone new to banking, U.S. Savings Bonds are usually the simpler choice because they're backed by the government and have straightforward rules.

You can open a savings bond account if you're a U.S. citizen or resident alien with a Social Security number. If you're under 18, a parent or legal guardian must open the account on your behalf. There's no minimum age to be named as the owner of a bond — even a newborn can have one.

Key Takeaways

  • U.S. Savings Bonds are purchased directly through TreasuryDirect, the government's online platform, with no bank required.
  • You need a Social Security number, a valid email address, and a bank account to set up TreasuryDirect and buy bonds.
  • Series EE bonds (the most common type for savers) require a minimum purchase of $25 and earn interest for 30 years.
  • Your bonds are held electronically in your TreasuryDirect account, and you can view them, track interest, and redeem them online.
  • You cannot cash in most bonds for at least one year, and if you cash them in before five years, you lose the last three months of interest.

Setting up a TreasuryDirect account for U.S. Savings Bonds

U.S. Savings Bonds are sold only through TreasuryDirect, which is the U.S. Treasury's official online system. You don't need a bank account to buy bonds, but you do need one to fund your purchases and receive redemption money. Here's what you'll need before you start: a valid email address, a Social Security number, and online access to a checking or savings account at any U.S. bank or credit union.

Go to treasurydirect.gov and click "Open an Account." You'll create a login and password, then answer security questions. The system will ask for your name, address, date of birth, and Social Security number. This takes about 10 minutes. After you submit, TreasuryDirect will send a confirmation email — click the link in that email to set up your account.

Once your account is active, you'll link your bank account to TreasuryDirect so money can move between them. You'll enter your bank's routing number and your account number (both appear on the bottom left of your checks, or you can call your bank). TreasuryDirect will make two small test deposits to your bank account — usually within one business day. You'll then log back into TreasuryDirect and confirm those amounts to verify the account is really yours.

Choosing which type of bond to buy

The two main types of U.S. Savings Bonds available to individual savers are Series EE and Series I. Both are purchased through TreasuryDirect, but they work differently.

Series EE bonds have a fixed interest rate set by the Treasury and announced every six months. You buy them at half their face value — so a $100 bond costs you $50 — and they're may provide to double in value in 20 years. After 20 years, they continue earning interest for another 10 years. The interest rate is currently lower than it has been historically, so check treasurydirect.gov for the current rate before you buy. The minimum purchase is $25.

Series I bonds have an interest rate that changes every six months based on inflation. If inflation is high, your rate goes up; if inflation is low, your rate goes down. This makes them useful if you're worried about the cost of living rising. Series I bonds also have a minimum purchase of $25. The downside is that you cannot redeem them for at least one year, and if you cash them in before five years, you lose the last three months of interest — this rule applies to both types.

For most people new to savings bonds, Series EE is easier to understand because the rate doesn't change. Series I makes sense if you want protection against inflation eating away at your money's value.

Buying your first bond through TreasuryDirect

Once your account is set up and your bank account is verified, you're ready to buy. Log into TreasuryDirect and click "BuyDirect." You'll choose whether you want Series EE or Series I, then enter the amount you want to spend. You can buy in any amount from $25 up to $10,000 per bond type per calendar year (so you could buy $10,000 in EE bonds and $10,000 in I bonds in the same year).

You'll also decide whether the bond is for yourself or as a gift for someone else. If it's a gift, you can choose to have it delivered electronically to the recipient's TreasuryDirect account (if they have one) or held in your account until you're ready to give it to them. Then you'll review the details and confirm the purchase. The money is withdrawn from your linked bank account, usually within one business day.

Your new bond appears in your TreasuryDirect account when ready, even though the money is still processing. You can see the purchase date, the amount you paid, the interest rate, and the maturity date. TreasuryDirect updates your interest earnings every month, so you can watch your money grow.

Understanding when you can access your money

This is the part that surprises many new savers: you cannot cash in a U.S. Savings Bond during the first year you own it. If you need the money before 12 months have passed, you're stuck. After one year, you can redeem it anytime, but there's a penalty if you do it before five years: you lose the last three months of interest.

Here's an example: You buy a Series EE bond on January 15, 2024, for $50. On March 15, 2024 (two months later), you need the money. You cannot redeem it yet. On January 15, 2025 (one year later), you can redeem it, but you'll lose three months of interest. On January 15, 2029 (five years later), you can redeem it without any penalty, and you'll keep all the interest you've earned.

When you're ready to redeem, you log into TreasuryDirect, select the bond, and request redemption. The money goes back to your linked bank account within a few business days. TreasuryDirect will also send you a 1099-INT form at tax time if you earned more than $10 in interest, because that interest is taxable income.

Managing your bonds and tracking growth

Once you own bonds, TreasuryDirect makes it straightforward to see what you have. Your account dashboard shows every bond you own, the date you bought it, how much you paid, the current value, and the interest you've earned so far. You can also read a statement anytime you want to print it or save it.

If you buy bonds as gifts for children or grandchildren, you can set them up in the child's name (with a parent or guardian as the account owner). The bonds will be there waiting when the child turns 18 and can take over the account. This is a common way to save for a child's future without putting the money in a regular savings account where it might be spent.

TreasuryDirect also lets you set up automatic purchases if you want to buy bonds on a regular schedule — for example, $100 every month. This is called a "recurring purchase" and it's a good way to build savings without having to remember to buy each time.

Frequently Asked Questions

Can I buy savings bonds through my bank instead of TreasuryDirect?

No. U.S. Savings Bonds are sold only through TreasuryDirect. Some banks used to sell paper bonds, but that program ended in 2011. If someone offers to sell you a U.S. Savings Bond through a bank or other service, it's not legitimate.

What happens if I lose my TreasuryDirect password?

You can reset it on the login page using your email address. TreasuryDirect will send you a link to create a new password. If you can't access your email, you'll need to call TreasuryDirect at 844-284-2676 and verify your identity with your Social Security number and other personal information.

Do I have to pay taxes on the interest I earn?

Yes. The interest on U.S. Savings Bonds is subject to federal income tax. You can choose to pay taxes each year as the interest accrues, or wait and pay all the taxes when you redeem the bond. You'll receive a 1099-INT form from TreasuryDirect if your interest exceeds $10 in a year. The interest is not subject to state or local income tax.

Can I cash in a bond early if it's an emergency?

After the first year, yes — you can redeem anytime. But if you redeem before five years, you'll lose the last three months of interest as a penalty. If you're in a true emergency and need money, this might still be worth it, but it's worth checking if you have other options first.

What's the difference between a savings bond and a savings account?

A savings account lets you deposit and withdraw money anytime without penalty. A savings bond locks your money away for at least a year and charges a penalty if you take it out before five years. In return, bonds usually earn more interest than savings accounts. Bonds are better for money you know you won't need soon; savings accounts are better for emergency funds.