Planet Money
3:00 pm
Mon November 21, 2011

Buying A Savings Bond Is About To Get Harder

Originally published on Wed May 23, 2012 10:15 am

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.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

This January marks a turning point for an icon of the U.S. economy: the savings bond. Those paper certificates that the U.S. government sold to citizens as investments will no longer be available at your corner bank. Caitlin Kenney of our Planet Money team has this remembrance.

CAITLIN KENNEY, BYLINE: Savings bonds used to be huge. Here's an ad for them from the 1970s.

(SOUNDBITE OF TV AD)

UNIDENTIFIED CHILD: Grandpa, what's this?

UNIDENTIFIED MAN: This is the United States savings bond for you.

UNIDENTIFIED CHILD: Oh.

UNIDENTIFIED MAN: Like money that grows.

UNIDENTIFIED CHILD: How big does it grow?

UNIDENTIFIED MAN: Big as a car, a house, most anything.

KENNEY: The idea was to get regular people to lend the U.S. government money. You would go to the bank and buy a savings bond for $25 or 50, and after a certain number of years the government would pay you back that money plus interest. A $50 savings bond bought in 1975 was worth well over $250 30 years later. They were very popular.

MCKAYLA BRADEN: We sold billions and billions of dollars of savings bonds over the years.

KENNEY: Mckayla Braden works for the Treasury Department. She says savings bonds got their start back in the 1930s. The government was expanding its size, launching a bunch of new programs like the WPA.

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.

(SOUNDBITE OF MUSIC)

MEL BLANC: (As Bugs Bunny) (Singing) Any bonds today? Bonds of freedom, that's what I'm selling. Any bonds today? Scrape up the most you can. Here comes the freedom man.

KENNEY: By the '50s and '60s, savings bonds were a regular part of American life. People bought them through the payroll program at work. They bought them when their kids were born to save for college. They bought them to save for a home. But starting about 20 years ago, those ad campaigns stopped working so well.

BRADEN: To be honest with you, it got harder and harder to sell savings bonds the way we used to sell them, because there was a lot of competition for savings instruments.

KENNEY: People thought, why should I invest my money in a savings bond when I can get a better return from a CD or a money market account? Also, it's hard to keep track of those paper certificates. People lost them or forgot about them. Mckayla Braden says there are close to $16 billion worth of savings bonds out there that have matured but not been cashed in.

By the '80s and '90s, people had other ways to save for retirement or college. Now there are lots of options.

(SOUNDBITE OF CHILDREN PLAYING)

KENNEY: This is a playground in Prospect Park in Brooklyn. I talked to a bunch of parents here to see if any of them had savings bonds for their kids. David and Rachel Missoni, here with their 3-year-old son, gave me a typical response.

Does your son have any U.S. savings bonds?

DAVID MISSONI: No.

RACHEL MISSONI: No, the thought honestly never crossed my mind. I think maybe the idea seems a little bit old-fashioned.

KENNEY: It's not just that regular citizens have lost interest in lending money to the U.S. government. It's that the U.S. government doesn't need us to lend it money anymore. It has lots of people to borrow money from. Big banks, investment institutions and foreign governments like China.

Already the marketing department for savings bonds has gone away. And starting January 1st, banks will no longer sell savings bonds. But that doesn't mean they're disappearing entirely. If you really want one, there's still a way you can buy one - online through a Treasury website - although I should stress, if you really want one.

BRADEN: You have to have your own Treasury direct account, and then you can buy gift bonds in Treasury direct. And it's placed in what we call a gift box. All right now...

KENNEY: I'll spare you the details. Even Mckayla Braden from the Treasury Department admits it's a pain in the neck. On the upside, purchasing online means you can't lose your savings bond. And when your bond is ready to be cashed in, the money just automatically shows up in your bank account.

Caitlin Kenney, NPR News, New York. Transcript provided by NPR, Copyright National Public Radio.

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