How To Invest 500 Dollars: Savings Bonds

How to invest 500 dollars is a question I get often.  In my last blog I told you guys about my very first investment (if you call charging your mom a nickel to borrow five bucks an investment).  We also talked about a few things you need to take care of in order to put yourself in a position to invest small amounts of money.  

Well we have graduated from investing $0-$200 and now we want to cover how to invest 500 dollars.  To be frank, any of the ways you invested your initial $0-$200 pretty much apply to $500 as well.

Having said that, savings bonds are your best long term bet if your wondering how to invest 500 dollars.

  • Buy a Savings Bond: A savings bond is a bond issued by the government and sold to the general public.  Savings bonds are quality investments because they offer a fixed interest rate over a fixed period of time.  O yeah, savings bonds issued by the government are not subject to local or state income tax.  There are two types of savings bonds you need to know about
  1. Series EE Bonds (*Great For Young People)- Are guaranteed to double in twenty years | Pay  fixed interest rate | Earn Interest Each Month | Earn interest for thirty years | Are available electronically .
  2. Series I Bonds- Also earn interest for thirty years | Paper and electronic bonds are sold at face value | Two interest rates: One is fixed when you buy, the other reacts to inflation rate.

 We Like Series EE Bonds: Lets Take a Closer Look

EE bonds are a low risk way to invest your money for the long term.  People often purchase EE bonds to cover education costs, retirement, or pay for special gifts. EE bonds are sold at face value, meaning that a $300 bond costs $300.  When you redeem the bond, you receive the face value of the bond plus the interest you’ve accrued over time.  We recommend hanging on to your series EE bonds for at least five years to avoid penalties.

If you do redeem your bond before five years, you forfeit the interest from the previous three months, not a huge deal but still better to wait it out.

Savings bonds are by no means a get rick quick scheme, but they are proven way to invest.  Now you know how to invest 500 dollars and let that investment make you money in the future.

Check out our basics of bonds page.

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Comparing and Contrasting Types of Savings Bonds