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Good to see the Fool bring up US savings bonds again as an intermediate term savings tool. There are actually a couple of additional points that are important to those considering them.

1) I actually recommend using them as a short term savings tool, but can take a little while to set up. If you simply purchase them in small denominations, you can cash out as little as $50 (plus interest) at a time. Buy purchasing them in bunches every month, they will become available for cashing out in a laddered fashion.

2) You can trade up bonds after their initial holding period. If the underlying interest rate of the bond increases, you can simply cash in lower interest rate bonds and purchase bonds at the new higher rates. (Between 1 and 5 years it may not be worth it as there is still an early withdrawl penalty of 3 months worth of interest.)

3) Bonds must be honored at any bank.

4) Bonds are secure. The paper they are printed on is just paper. If the bonds are stolen or destroyed, they are non-transferable and are replaced for free.

5) Both I & EE bonds are good for 30 years. EE's can be exchanged for HH (with interest disbursements w/o local taxes) for another 20 years. This is true "buy and hold" for fixed income.

6) allows purchases to be made with credit cards. This allows the purchaser to earn an additional return if using a points card. Additionally if timed correctly, the purchaser can gain about two months worth of interest without putting any money down (making it only 10 months until cashing out). (Note: It is not worth using your credit card unless you pay it off every month.)

I use the following system:
-May 25: Credit card billing period ends.
-May 25: Purchase bonds online (earn 1% cash back on card).
-May 26-28: Bonds are billed to card (always at least 1 day delay).
-May 29-ish: Bonds are issued with the May date (Bonds are only dated with the month and year they are issued and start earning interest).
-June 1: Bonds add interest for May.
-June 25: Credit card billing period ends (billed for May purchase).
-(The process is repeated at this point with a new purchase while this list follows the remainder of the May purchase.)
-July 1: Bonds add interest for June.
-July 23: Pay credit card bill by phone (or earlier with another method).

I've been buying into bonds for a while as I transfer my short term savings into bonds to get a higher interest rate than the banks will offer. I hope others try bonds as a reliable way to have a safe and secure savings fund.

Best wishes.

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