America is hard to find work, and many Americans are looking. Over 45% of Americans make extra money by doing a side job. Most Americans who work on the side work 12 hours longer in addition to their main job. And even after all that extra work, many Americans barely make half of their primary monthly income on a side business.
If you’re making money on a side business and want to save it in the long run, try savings bonds.
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Are you looking for a good place to keep the savings that come from doing a sideline? Then a savings bond can be a good choice for you.
A savings bond is a US government bond. In other words, when you buy a savings bond, you are borrowing money from the American government to run its business.
And just like with a traditional bond, the payment of a savings bond is practically guaranteed when necessary. As long as the American government exists, your return on investment is guaranteed in a savings bond guarantee.
A savings bond is similar to a traditional government bond as an investment vehicle, but has several distinct differences.
In contrast to a traditional government bond, a savings bond pays interest only after it has been repaid. A savings bond is sometimes referred to as a zero coupon bond.
A coupon refers to the rate of interest that is added to a bond over time. For example, a traditional government bond earns interest twice a year. A savings bond receives additional interest every month.
In contrast to a government bond, which pays out the interest that is incurred when it is paid out, this is not the case with a savings bond. You have to wait about a year before you can withdraw a savings bond.
And if you pay out a savings bond before five years have elapsed, you will lose the last three applicable interest months.
Taxes on a savings bond are only paid after the bond has been repaid. Taxes are paid through interest payments with most traditional bonds. And taxes on savings bonds are only paid at the national level.
The main difference between a traditional bond and a savings bond is that a savings bond still exists after its due date.
Types of savings bonds
There are basically three types of savings bonds, but only two currently exist.
The Series E savings bonds were first created during World War II to fund the war effort. Series E savings bonds were withdrawn from circulation in 1980 and are no longer issued.
If you own an E Series savings bond, you can still cash them, but they stopped earning interest in 1980.
The Series EE savings bonds were first introduced in 1980 and are the direct replacement for the Series E. EE savings bonds that are still issued today.
If you purchased an EE Series electronic bond after June 2003, the US Treasury Department guarantees you can redeem it for twice its face value. If you hold a Series EE electronic bond that was issued in June 2003 or thereafter for at least 20 years, an interest rate of 3.5% will be earned annually.
The series I savings bonds offer improved protection against inflation compared to the EE series savings bonds. All Series I savings bonds offer a fixed or floating rate based on the consumer price index.
You can purchase savings bonds for any amount between $ 25 and $ 10,000 within 12 months.
And you can only redeem a savings bond when it is at least 12 months old. If you redeem a savings bond before its five-year term has expired, you will lose at least three months of interest.
EE and I series savings bonds for a period of up to 30 years. If you’re saving money by doing sideline work, you can use a savings bond as a long-term strategy to keep it on.
However, a major disadvantage of savings bonds is the interest rate.
Interest rates on savings bonds (and other disadvantages)
Savings bonds are a great way to save money that was hard-earned from outside employment. However, the main main disadvantage of investing in savings bonds is that they generate minimal interest.
Currently, Series EE savings bonds only offer an interest rate of 0.10%. The Series I savings bond currently offers an interest rate of 1.68%. However, this interest rate can vary depending on the consumer price index.
Savings bonds are inherently non-transferable and cannot be sold to others. When you buy an electronic government bond, you can transfer it to someone else’s account.
However, if you have a long term savings strategy in mind, it is a great way to save money from a side business in a savings bond.
Side hustle strategy
Paper savings bonds can be redeemed at banks, check cashing centers, and other financial institutions. When you buy electronic savings bonds from TreasuryDirect.gov, you can credit the money to your account and then transfer it to a bank account.
It’s not easy to get a sideline in this pandemic-ravaged economy. So, think about every possible option to save more of the money you make.
If possible, seek help from a financial advisor if you are looking to save money in the long run.
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