Yes, savings bonds increase in value, but the growth is slow and predictable

Savings bonds do increase in value from the moment you buy them. The U.S. Treasury adds interest to your bond every month, though you do not see that money until you cash it in. The amount of growth depends on which type of bond you own — Series EE bonds and Series I bonds work differently, and the rate you earn when you buy matters for the life of the bond.

The increase is may provide. You will not lose money on a savings bond, and the Treasury will not reduce the value. But the growth is modest compared to stocks or other investments. Most people buy savings bonds for safety and predictability, not for high returns.

Key Takeaways

  • Series EE bonds double in value over 20 years if held to maturity, earning a fixed rate set when you purchase.
  • Series I bonds earn a combined rate of a fixed portion plus an inflation adjustment that changes every six months.
  • Interest accrues monthly but you only receive the money when you redeem the bond or it reaches final maturity.
  • You must hold a savings bond at least one year before cashing it in, and you lose the last three months of interest if you redeem before five years.
  • The rate you lock in at purchase stays the same for Series EE bonds, but Series I rates adjust twice yearly based on inflation.

How Series EE Bonds grow in value

A Series EE bond has a fixed interest rate that the Treasury sets when you buy it. That rate stays the same for the entire life of the bond — 30 years. The Treasury adds that interest to your bond every single month, compounding it so you earn interest on your interest.

The most important feature of Series EE bonds is the 20-year doubling may provide. If you hold the bond for 20 years, it will be worth at least double what you paid for it, even if the interest rate was very low when you bought it. For example, if you paid $50 for a Series EE bond, it will be worth at least $100 after 20 years. After 30 years, the bond stops earning interest and reaches final maturity.

The actual value depends on the rate. If you bought a Series EE bond when rates were higher, your bond grows faster. If you bought when rates were lower, it grows more slowly — but the doubling may provide ensures you hit that $100 mark by year 20 anyway. You can check the current Series EE rate on the TreasuryDirect website.

How Series I bonds grow in value

Series I bonds work differently because they are designed to protect you from inflation. The rate you earn has two parts: a fixed rate set by the Treasury when you buy, and an inflation rate that changes every six months based on the Consumer Price Index.

The fixed rate never changes — it is locked in for the life of the bond. But the inflation rate adjusts on May 1 and November 1 each year. The Treasury combines both rates to calculate your total earnings. This means your Series I bond grows faster when inflation is high and slower when inflation is low, but you always earn at least the fixed portion.

Like Series EE bonds, Series I bonds earn interest monthly and you must hold them at least one year before cashing in. The current combined rate for new Series I bonds appears on TreasuryDirect, along with the rates for bonds purchased in previous periods.

When you actually receive the money from growth

The interest on your savings bond accrues — meaning it builds up — every month, but you do not receive any of that money until you redeem the bond. Redeeming means cashing it in and getting the full value, including all the interest that has accumulated.

You can redeem a savings bond at most banks, through TreasuryDirect online, or by mail. The process takes a few days to a few weeks depending on your method. Once you redeem, the Treasury sends you the original purchase price plus all the interest earned.

If you do not redeem the bond, it continues to earn interest until it reaches final maturity — 30 years for both Series EE and Series I bonds. After that, it stops earning interest and you should cash it in.

The penalty for cashing in too early

Savings bonds have a one-year holding requirement. You cannot redeem a bond during its first year of ownership, no matter what. After one year, you can cash it in anytime, but there is a cost if you do it before five years have passed.

If you redeem a savings bond before it has been held for five years, you lose the last three months of interest. For example, if you bought a bond on January 15 and redeemed it on March 1 of the following year, you would receive the value as of December 15 — three months earlier. This penalty applies to both Series EE and Series I bonds.

After five years, you can redeem without losing any interest. This is why savings bonds work best for money you do not plan to touch for at least five years.

Comparing savings bond growth to other investments

Savings bonds are safe, but they grow slowly. The current Series EE rate is typically between 0.10% and 5% depending on when you bought, and Series I rates vary based on inflation. By contrast, a high-yield savings account at a bank might pay 4% to 5%, and the stock market has historically returned around 10% per year on average over long periods.

The trade-off is that savings bonds have no risk. You will never lose money, and the rate is locked in. A stock investment can go down in value. A high-yield savings account rate can drop at any time. Savings bonds are best for money you want to protect and grow steadily, not for money you need to grow quickly.

Many people use savings bonds as part of a mixed strategy — some money in bonds for safety, some in higher-return investments for growth. The right choice depends on when you need the money and how much risk you are comfortable with.

How to track your bond's current value

If you own savings bonds, you can see their current value on TreasuryDirect. Log in with your account, and the site shows each bond you own, the purchase date, the rate, and the current redemption value. This value includes all the interest that has accrued so far.

You can also use the Savings Bond Calculator on the TreasuryDirect website to estimate what a bond will be worth at any future date, based on the rate you locked in when you bought it. This tool helps you plan when to redeem or decide whether to hold longer.

If you own paper bonds issued before 2003, you can use the same calculator by entering the series, denomination, and issue date. Paper bonds work the same way as digital bonds — they earn interest monthly and can be redeemed at a bank.

Frequently Asked Questions

Can I lose money on a savings bond?

No. The U.S. Treasury guarantees that savings bonds will never decrease in value. The worst outcome is that your bond earns very little interest if rates are low, but you will always get back at least what you paid for it, plus any interest earned.

What happens if I need the money before five years?

You can redeem after one year, but you will lose the last three months of interest. For example, a bond held for three years would be valued as of two years and nine months. After five years, you can redeem without any penalty.

Do I have to pay taxes on the interest from savings bonds?

Yes. The interest is subject to federal income tax, though not state or local tax. You can choose to pay taxes each year as interest accrues, or wait and pay all the taxes when you redeem the bond. Most people wait until redemption.

Which is better, Series EE or Series I bonds?

Series EE bonds are better if you want a may provide doubling of your money in 20 years. Series I bonds are better if you are worried about inflation eating into your returns. Check the current rates on TreasuryDirect — whichever rate is higher at the time you buy is usually the better choice.

Can I buy savings bonds for someone else as a gift?

Yes. You can buy Series EE or Series I bonds through TreasuryDirect and register them in someone else's name. The person you name as owner controls the bond and receives the money when it is redeemed. You can also buy paper bonds as gifts at some banks.