An EE bond is a savings bond issued by the U.S. Treasury that you buy at a discount and cash in for a higher value later

When you buy an EE bond, you pay half of what it will be worth at maturity. For example, you might pay $50 for a bond that will be worth $100 in 30 years. The bond earns interest automatically—you do not have to do anything or reinvest the money. The Treasury adds the interest to the bond's value each month, and that growing total is what you get when you cash it in.

EE bonds are backed by the full faith and credit of the U.S. government, which means there is no risk that you will lose your principal. They are also completely safe from creditors and lawsuits—if someone sues you or you owe money, they cannot seize a bond held in your name. This makes them useful not just as savings but as a protected asset.

You buy EE bonds through TreasuryDirect, the government's online platform. You cannot buy them through a bank or broker. You can hold them in your own name, in a trust, or as a gift for someone else. Once you own one, you can cash it in anytime, though there is a penalty if you cash it in before five years have passed.

Key Takeaways

  • You buy an EE bond for half its face value—a $100 bond costs $50—and it grows to full value over time through interest.
  • EE bonds are issued and backed by the U.S. Treasury, so your money is completely safe and cannot be seized by creditors.
  • Interest compounds monthly and is added to the bond automatically; you do not have to manage or reinvest it yourself.
  • You can cash in an EE bond anytime after five years without penalty, though cashing in earlier means you lose the last three months of interest.
  • EE bonds are purchased only through TreasuryDirect.gov, not through banks or investment firms.

How the interest rate works on an EE bond

The Treasury sets the interest rate on EE bonds every six months, in May and November. The rate is based on the five-year Treasury note yield, and it applies to all bonds purchased during that six-month period. Once you buy a bond, its rate is locked in for the life of the bond—it does not change if rates go up or down later.

The current rate is posted on TreasuryDirect.gov before each purchase period begins. Rates have varied widely over time: they were very high in the 1980s and 1990s, dropped to near zero during the 2008 financial crisis, and have risen and fallen since then. Check the current rate before you buy, because it determines how much your money will grow.

There is also a may provide built into EE bonds: if your bond has not reached its face value by the time it matures (30 years), the Treasury will add money to bring it up to face value. This means you are may provide to at least double your money, even if interest rates were very low when you bought it. This may provide is unique to EE bonds and does not apply to other Treasury savings bonds.

The five-year holding period and early withdrawal penalty

You can cash in an EE bond anytime, but there is a cost to doing so before five years have passed. If you cash in a bond before the five-year mark, you lose the last three months of interest. This is not a percentage penalty—it is a flat loss of three months' worth of earnings, no matter how much the bond has grown.

After five years, you can cash in the bond anytime without any penalty. The full amount of interest you have earned stays with you. Many people hold EE bonds much longer than five years—some keep them for decades—because the interest keeps compounding and there is no reason to cash them in early.

If you need the money before five years are up, you have to weigh whether the three-month interest penalty is worth it. For small bonds or bonds held for just a few months, the penalty might be just a few dollars. For larger bonds held for several years, the penalty could be more significant.

How to buy an EE bond through TreasuryDirect

You buy EE bonds by creating an account on TreasuryDirect.gov, the Treasury's official online platform. You will need a Social Security number, a valid email address, and a bank account for electronic transfers. The process takes about 15 minutes the first time you set up an account.

Once your account is open, you can buy bonds in any amount from $25 to $10,000 per calendar year. You can buy them for yourself or as a gift for someone else. If you buy a bond as a gift, the recipient can claim it in their own TreasuryDirect account later, or you can hold it in your account and give them access when they turn 18 or at another time you choose.

The money is transferred electronically from your bank account to the Treasury. The bond is issued immediately and appears in your TreasuryDirect account. You can view its current value anytime by logging in. You do not receive a physical certificate—everything is digital.

Tax treatment of EE bond interest

Interest earned on EE bonds is subject to federal income tax, but not to state or local income tax. You have two choices about when to pay the tax: you can pay it each year as the interest accrues, or you can wait and pay all the tax when you cash in the bond.

Most people choose to wait and pay the tax when they cash in, because it is simpler and because they may be in a lower tax bracket in retirement. If you cash in a $100 bond that you bought for $50, you owe federal income tax on the $50 in interest, not on the full $100.

There is one major tax advantage: if you use EE bond proceeds to pay for may have access to education expenses—tuition and fees at an accredited college, university, or vocational school—you may be able to exclude the interest from your taxable income entirely. This is called the Education Savings Bond Program. You have to meet income limits and other conditions, and you must use the money the same year you cash in the bond. Check the Treasury's website or speak with a tax professional to see if you may have access to.

EE bonds versus other Treasury savings bonds

The Treasury issues two types of savings bonds: EE bonds and I bonds. The main difference is how they handle inflation. An EE bond has a fixed interest rate that never changes. An I bond has a rate that adjusts every six months based on inflation, so it protects you if prices rise sharply.

If you think inflation will be low or stable, an EE bond may be the better choice because you know exactly what your money will grow to. If you are worried about inflation eating into your savings, an I bond is designed to keep pace with rising prices. Both bonds have the same five-year holding period and the same $10,000 annual purchase limit per person.

EE bonds also differ from Treasury bills, notes, and bonds, which are sold at auction and can be bought through banks and brokers. Those securities are designed for investors who want to buy and sell them before maturity. Savings bonds like EE bonds are designed for long-term savers who plan to hold them until they mature or need the money.

What happens when an EE bond reaches maturity

An EE bond reaches maturity after 30 years. At that point, it stops earning interest. You can still hold it in your TreasuryDirect account, but no new interest will accrue. You should cash it in and either spend the money or reinvest it in new bonds or other savings vehicles.

If you forget to cash in a mature bond, it will sit in your account earning nothing. The Treasury does not automatically cash it in or move it anywhere. You have to log into TreasuryDirect and request the redemption yourself. It is a good idea to set a reminder a few months before a bond matures so you do not miss the opportunity to use the money.

Frequently Asked Questions

Can I lose money on an EE bond?

No. The Treasury guarantees that an EE bond will be worth at least its face value after 30 years, even if interest rates were very low when you bought it. Your principal is safe, and you are may provide to at least double your money.

What happens if I cash in an EE bond after three years?

You lose the last three months of interest. If your bond has earned $60 in interest over three years, you would receive only $55 when you cash it in. After five years, this penalty no longer applies.

Can I buy EE bonds for my children?

Yes. You can buy a bond in your child's name or as a gift. If you buy it as a gift, you hold it in your account until they are old enough to claim it themselves, or you can transfer it to them at any time. The interest is taxed to whoever owns the bond.

Are EE bonds a good investment compared to savings accounts?

EE bonds typically offer higher interest rates than regular savings accounts, but the rate changes every six months and may be lower than what some high-yield savings accounts offer. The main advantage of EE bonds is safety and the may provide that you will at least double your money. Compare current rates on TreasuryDirect.gov with rates at your bank before deciding.

What if I need to cash in my EE bond but do not have a TreasuryDirect account anymore?

You can still cash in the bond by contacting the Treasury directly. You will need to provide proof of ownership and identity. The process takes longer than cashing in through TreasuryDirect, so it is best to keep your account active if you own bonds.