Best day to buy a Savings Bond
Thursday, February 23rd, 2006
Categorized as: Buying US Savings Bonds
Did I read somewhere that the best day to buy a Savings Bond is the last day of the month?
Tom’s response
When you buy a Savings Bond, you will earn interest for the entire month of issue no matter which day of the month you buy it on. So you get the equivalent of a free month’s worth of interest if you purchase on the last day of the month.
However, you also need to know that when you buy at a bank, your Savings Bond is issued as of the date you complete the bank transaction.
On the other hand, when you buy electronic bonds through TreasuryDirect, the bond is issued on the day the Treasury gets the money from your bank, so it’s better to schedule TreasuryDirect transactions a few days before the end of the month.
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Tom Adams
A few *business* days before the end of the month.
I am missing something here. Given: If I buy a bond on the last day of the month, I get that month’s full interest on that bond.
However, if I buy the bond on ANY day of that month I still pay the same principal for the bond plus I still get that month’s full interest. Or don’t I?
What I’m trying to say is: I don’t see any advantage to buying a bond at the end of the month (as compared to the beginning of the month). Please explain! Thanks.
Cregg – the idea has a hidden assumption – when I show it to you, you’ll understand. The assumption is that your money is invested elsewhere during the beginning of the month, such as in a savings or money market account that pays interest daily.
Thus, when you switch to Savings Bonds at the end of the month, your money effectively earns interest from two different sources for that month.
Okay, now that makes sense to me.
I was blind to that assumption only because when I buy bonds, it comes straight out of my paycheck (not from previously invested funds.)
Cregg – in your case, you’re earning interest during the beginning of the month on money that was actually part of your employer’s funds. Still not a bad deal.