Savings Bonds vs. the Money Market

Thursday, September 9th, 2004
Categorized as: Savings Bonds and competitive investments

Assuming that I have $50,000 in a money market account, would it be advisable to pull it out and buy Savings Bonds with that money?

Tom’s response

The primary advantage of a Money Market account is that the money is instantly available to you. The primary disadvantage is that the rate is so low. In terms of safety (the risk that you won’t get your money back) Savings Bonds (guaranteed by the U.S. Treasury) are a tiny bit safer than bank Money Market Accounts (guaranteed by the FDIC), which are a little bit safer than non-bank Money Market Mutual Funds (not guaranteed by anyone, but generally considered very safe).

The primary disadvantage of Savings Bonds is that you can’t get your money out for one year after purchase. Between years one and five there’s a penalty of three months interest if you take your money out – however, the rates are so much higher that you can pay the penalty and come out ahead of Money Market funds and even 1- and 2-year bank Certificates of Deposit.

So it basically depends on how soon you might need the money. If you go with Savings Bonds, you might also consider investing electronically at TreasuryDirect rather than messing around with paper Savings Bonds.

Rate this post (1 to 5 stars):  1 Star2 Stars3 Stars4 Stars5 Stars
(Average rating: 5.00 stars)

FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:

No comments yet.

Comments Closed

June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

Savings Bond Calculator


Savings Bond

Get an answer to your questions from the Treasury's Savings Bonds team.

Click below to ask a question.

Ask the Treasury


Invest online in Savings Bonds or
marketable Treasury securities.

Deal directly with the U.S. Treasury.

More info


Log in