Savings Bond Series EE face value confusion
Friday, December 17th, 2004
Categorized as: Series EE US Savings Bonds
Why would I buy an EE savings bond online from TreasuryDirect, where I'll pay dollar for dollar, rather than buy a paper EE bond at a bank and pay only half the dollar value?
From an investor's perspective, TreasuryDirect's online Savings Bonds and paper Savings Bonds are exactly the same. In each case you invest a certain amount of money and your investment earns exactly the same amount of interest.
For EE bonds, which are guaranteed to double in value in a certain number of years, the guarantee works the same way for both paper and electronic bonds.
The confusion here is caused by the paper EE bonds having a face value of twice your investment. Even a clock that has stopped is right twice a day, while a paper Savings Bond will probably never be worth exactly its "face value," but someday will be worth a bit less than that one month and a bit more than that the next.
The face value feature of paper EE bonds is basically a marketing gimmick that the Treasury, with our thanks, has stopped using on new products, including I bonds and electronic EE bonds.
In terms of everything but the financially meaningless marketing gimmick, paper and electronic bonds are exactly the same thing.
There's more on this issue in the post Why electronic Savings Bonds aren't sold at half face value.