What Is a Savings Bond? Series EE and I Bonds Explained
A savings bond is a loan you make to the US government that pays you interest over time. It is among the safest places for money you will not need for years.
Key takeaways
- A savings bond is a US Treasury security: you lend the government money.
- Series EE pays a fixed rate and is guaranteed to double in value in 20 years.
- Series I combines a fixed rate with an inflation rate that resets every six months.
- No cashing in for 12 months; cashing in before five years costs three months of interest.
What a savings bond is
When you buy a savings bond, you lend money to the US Treasury, which repays your original amount plus interest. Unlike a stock it has no daily market price, and unlike a bank account you cannot withdraw on demand.
They are among the safest investments available, backed by the full faith and credit of the US government. The risk is not losing principal; it is that money is tied up, and returns may lag inflation. Today you can buy Series EE and Series I.
Series EE vs Series I at a glance
| Feature | Series EE | Series I |
|---|---|---|
| Interest | Fixed rate set at purchase | Fixed rate plus inflation rate |
| Rate changes | Fixed for 20 years | Inflation part resets every six months |
| 20-year promise | Guaranteed to double in value | No doubling guarantee |
| Maturity | 30 years | 30 years |
| Minimum and yearly limit | $25; $10,000 per person | $25; $10,000 per person, plus $5,000 paper via tax refund |
How Series EE bonds work
A Series EE bond is sold at face value: a $50 bond costs $50. It earns a fixed rate, set when issued, for 20 years. Its headline feature is the doubling guarantee: if the fixed rate alone has not doubled its value by its 20th anniversary, the Treasury makes a one-time adjustment so it is worth twice what you paid. It then keeps earning interest until maturity at 30 years.
The guarantee only pays off if you hold the full 20 years, so EE suits a distant goal such as education savings.
How Series I bonds work
A Series I bond is also sold at face value, but its rate has two parts: a fixed part that never changes, and an inflation part, based on the Consumer Price Index, that resets every six months, in May and November. Together they form the composite rate.
That makes I bonds popular when inflation is high, since the adjustment protects purchasing power. When inflation cools, the composite rate falls too, so an I bond is a hedge, not a growth engine.
How to buy on TreasuryDirect
Almost all new bonds are bought electronically through TreasuryDirect, the Treasury's website, from $25 after linking a bank account. You can buy for yourself or as a gift, including for a child; minors can own bonds in their own name.
The yearly limits apply per person, per series, per calendar year: $10,000 of electronic Series EE and $10,000 of electronic Series I. Paper I bonds are the one exception: up to $5,000 a year, but only with your federal tax refund, via IRS Form 8888. Banks no longer sell paper bonds over the counter.
The rules for cashing in
Three dates govern every bond. First, the 12-month lock-in: no redemption at all in year one, so never put emergency money into bonds. Second, the five-year penalty line: redeem earlier and you forfeit three months of interest; after five years, no penalty. Third, 30-year maturity: bonds then stop earning interest and should be redeemed.
Electronic bonds are redeemed through TreasuryDirect to your linked bank account; paper bonds can be cashed at many banks, though some only redeem for their own account holders.
A worked example
Take a $5,000 Series EE bond held 20 years. Under the doubling guarantee it is worth $10,000 at its 20th anniversary, even if the fixed rate alone would not have got it there.
Now the penalty rule: redeem after two years (24 months) and you forfeit three months of interest, keeping 21 months. The penalty never touches principal. These figures are illustrative; actual interest depends on rates in force.
Taxes, and the education exclusion
Bond interest is subject to federal tax, but you can defer it until redemption or maturity, up to 30 years. Interest is exempt from state and local tax.
Interest may also be excluded from federal tax when bonds pay qualified higher education expenses, but conditions are strict: the owner must have been at least 24 at issue, expenses must be for the owner, spouse, or dependent, and income limits apply. Bonds bought in a child's name do not qualify; check IRS Publication 970.
Bottom line
A savings bond is a safe, slow, government-backed way to save: Series EE for a fixed rate with a 20-year doubling promise, Series I for inflation protection. Buy through TreasuryDirect from $25, respect the 12-month lock-in and five-year penalty line, and treat bonds as the steady part of savings, not the whole plan. If you need instant access, our guide to types of savings accounts compares withdraw-any-time accounts; to see interest build, try our compound interest calculator. For the saving habit, see how to save money fast on a low income, and to compare returns, read our guide to annual percentage yield.
Sources & further reading
- TreasuryDirect, Savings BondsOverview, $25 minimum, limits (curl: 200, 29 Oct 2026).
- TreasuryDirect, Series EE BondsDoubling guarantee, 30-year maturity (curl: 200, 29 Oct 2026).
- TreasuryDirect, Series I BondsFixed plus inflation rate (curl: 200, 29 Oct 2026).
- TreasuryDirect, Buy a BondPurchase route, $10,000 limits (curl: 200, 29 Oct 2026).
- TreasuryDirect, Tax InformationFederal deferral, state exemption (curl: 200, 29 Oct 2026).
- IRS Publication 970Education exclusion conditions (curl: 200, 29 Oct 2026).
- Investor.gov, Savings BondsGovernment backing, yearly limits (curl: 200, 29 Oct 2026).
This article is general information only and is not financial advice. Savings bond rates, limits, and tax rules change, so check TreasuryDirect and the IRS before buying or redeeming.