What does the government do with Savings Bond money?

When I buy a savings bond, what does the government do with that money? Does it stay in a fund or get used to do government business? When I cash one, where does the money come from? Does the US have a reserve fund set aside to pay bonds and bond interest? Or are they paying out of current receipts?

Tom's response

The U.S. government spends inordinate amounts of money each year - lots, lots more than it collects in taxes.

To cover the amounts the government spends above what it takes in through taxes, the Treasury borrows the money.

Savings Bonds are one of the ways the Treasury borrows money, although Savings Bonds are very minor compared to the two largest sources of borrowed funds, marketable Treasury securities and the Social Security Trust Fund.

When you redeem a Savings Bond, the money comes from the same Treasury funds, which, as we've seen, are a mix of tax receipts and borrowing.

There's no reserve fund, just as you don't have a reserve fund to pay back a car loan or home mortgage. If you had the money for a reserve fund, you wouldn't need to borrow to begin with, and neither would the government.