How do I Determine the Value of Savings Bonds?

Dave Slovak

A savings bond is a security issued by a government treasury, and when investors buy savings bonds, they are essentially loaning money to the government. There are other types of bonds called municipal bonds that work differently from savings bonds. Some governments have historically issued savings bonds to raise capital for large-scale expenditures such as military spending during times of war. Although it requires quite a bit of math, people can determine the value of savings bonds as long as they know the type of bond, interest rates, denomination, and key dates associated with the bonds.

The type of bond, issue date and maturity date are needed to calculate its value.
The type of bond, issue date and maturity date are needed to calculate its value.

Most savings bonds are categorized based on the date when they were offered by the government. For example, common types of United States savings bonds are A, B, C, D, F, G, H, HH, J, E, EE, and I. These types are listed in chronological order, meaning that the first type issued by the government was A. Typically, the value of a savings bond that is of type A, B, C, D, F, G, H, HH, or J is the face value of the bond, meaning that a $50 US Dollar (USD) bond would be worth $50 USD. Savings bonds issued from 1941 to the present, however, may be worth an amount different from the face value.

You can use government-sponsored online calculators to easily determine the value of savings bonds. Another easy way to determine their value is to take them to your bank or credit union. You can typically redeem a savings bond at any federal financial institution, regardless of where it was purchased.

If you want to calculate the value of savings bonds without the assistance of an online calculator or bank, you need the following information: type of bond, or series, denomination, issue date, current date, and maturity date. You will also need to know the monthly interest rates for the life of the bond. If you are interested in redeeming a savings bond that has not yet reached its maturity date, you may have to deduct a penalty from the final value.

The tricky part of calculating the value of savings bonds is that they accrue interest monthly, and the interest rate can change frequently. Depending on the type of bond, there may be two rates used to determine the compound rate: a fixed rate and an inflation rate. As a result, you may have to setup a complex algorithm to determine the true current value of the bond. A simplified version of the formula would look something like the following.

Starting with the month issued, calculate the value of the bond. For example, assume you purchased a savings bond in January 1981. To determine the value of the bond in February 1981, you would calculate: ([starting value] x [monthly interest rate]) + [starting value] = [value for February]. Repeat for each month up to the present. This can get quite messy when you need to calculate the value of a 30 year-old bond, particularly because the interest rate often changes from month to month, but you can setup a spreadsheet to perform all of the calculations for you if you know the interest rates.

Once you have calculated the current value, remember to subtract any penalties for early redemption. Some savings bonds have a maturity date. When you attempt to redeem the bond before this date, you can be penalized several months’ interest. Also keep in mind that you may have to pay income tax when redeeming certain savings bonds.

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