Savings bonds are a lower-risk way to save. When you buy a savings bondSavings bond A special bond that the federal and some provincial governments will issue. In most cases, it is sold at regular times each year and pays a set rate of interest. Fees are included in the cost of the bond. Examples include the Canada Savings Bond (CSB).+ read full definition, you are loaning money to the government for a set period at a fixed interest rateInterest rate A fee you pay to borrow money. Or, a fee you get to lend it. Often shown as an annual percentage rate, like 5%. Examples: If you get a loan, you pay interest. If you buy a GIC, the bank pays you interest. It uses your money until you need it back.+ read full definition. There are 2 types of savings bonds offered by the Canadian government: Canada Savings Bonds (CSBs) and Canada Premium Bonds (CPBs).
9 things to know about savings bonds
- You can buy a savings bondBond A kind of loan you make to the government or a company. They use the money to run their operations. In turn, you get back a set amount of interest once or twice a year. If you hold bonds until the maturity date, you will get all your money back as well. If you sell…+ read full definition for as little as $100.
- Savings bonds are available to residents of Canada.
- You don’t pay any fees when you buy savings bonds.
- Savings bonds have a 3-year term. Interest rates are usually set for shorter periods.
- You earn a guaranteed interest rate. The rate could go higher during your bond’s termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition, but it won’t go lower.
- CSBs have a lower interest rate than CPBs. That’s because you can cash them in at any time and get interest earned to date.
- You can cash in CPBs at any time – but you will only get interest earned up to the last anniversary date of the bond.
- You can hold savings bonds in registered investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition accounts like TFSAs, RRSPs, and RRIFs.
- CSBs are only available through your employer if they offer a payroll savings plan. CPBs can be purchased through financial institutions, investment dealers or by telephone.
Some provinces also offer savings bonds. Example: Ontario Savings Bonds.
2 interest options
- Regular-interest bonds – You get interest payments each year on the anniversary of the issue date.
- Compound-interest bonds – Interest is automatically re-invested each year.
Buy for limited time only
You can buy savings bonds only at certain times of the year. Ask your bank or check the Canada Savings Bonds website to find out when they’re available. Current sales periods:
- between early October and November 1 for CSBs bought through payroll savings plans
- between early October and December 1 for all other savings bonds.
Other options for short-term savings
Savings bonds are just one of the ways you can save for the short term. Here are some other savings options to consider.
4 key points
- Minimum $100 investment
- Guaranteed interest rate
- Regular- or compound-interest options
- Can hold in a TFSA, RRSP or RRIF
Don’t miss the deadline. You can only buy savings bonds at certain times of the year.