Paper savings bonds used to be a wholesome part of American culture. You bought them when your kids were born, to save for college. You bought them to save for a home.
But starting next month, they'll be a lot harder to get. Banks will stop selling paper savings bonds on January 1, 2012.
Here's the way savings bonds used to work — you would go to the bank, plunk down some money, and get a certificate — a paper pledge that the U.S. government will pay back all your money, plus interest. After a set number of years, you'd take your paper bond to the bank and cash it in. The wait was worth it: a $50 savings bond bought in 1975 was worth over $250 dollars thirty years later.
"We sold billions and billions dollars of savings bonds over the years," explains Mckayla Braden, who works for the Treasury Department. She says savings bonds got their start back in the mid-1930s. The government was expanding its size, launching a range of programs like the WPA, and it needed funds.
The savings bond was pitched as a safe investment and a way to help your country. And the government got lots of famous people to make the pitch: Bing Crosby, Lucille Ball, John Wayne, even Bugs Bunny. By the '50s and '60s savings bonds were a regular part of American life. People bought them through a special "payroll program" where a set amount of money was automatically deducted from each paycheck.
But about twenty years ago the savings bond began to lose its allure. "It got harder and harder to sell them," Braden says. "There was a lot of competition for savings instruments."
New savings instruments like CDs and money market accounts offered higher interest rates. Another reason people turned away from the savings bond — it's hard to keep track of those paper certificates. People can lose or forget about them. Braden says close to $16 billion worth of savings bonds that have matured have not been cashed in.
The issue isn't just that regular citizens have stopped caring about lending money to the government, it's that the government doesn't need our money anymore. They have lots of people to borrow from: big banks, investment institutions, and foreign governments like China.
You can still get savings bonds, by going online and purchasing through the Treasury website, TreasuryDirect. Online there is no paper certificate to keep track of and when you are ready to cash your bond in, you can have the money sent straight to your bank account.