Canada Savings Bonds

You can purchase Canada savings bonds between the months of October and April. Although the time to buy them is limited, they can be redeemed in any month. These bonds are available from and guaranteed by the government of Canada. They are available in different amounts, and you can choose between regular interest or compound interest. The interest rate is guaranteed for the first year that you hold the bond. After that, the interest rate may vary until the bond reaches maturity. These bonds are available for purchase from most all banks, credit unions and financial institutions in Canada.

Canada savings bonds were introduced in the year 1946 as a war bond. Bonds are often thought of as low-risk by investment professionals because they are backed by the government and there is some guarantee when it comes to returns. This bond is good for most every Canadian because it is flexible, can be acquired for a reasonable price and is low risk. Some people buy bonds as gifts for their children or grandchildren. Although mutual funds are also fairly low risk, many people feel that savings bonds are even better because of the government backing.

There have been times when these bonds have decreased in popularity, for example when interest rates dropped. At that time, many investors chose higher yield securities like stocks and mutual funds. It was actually suggested in 2004 that the bonds be discontinued due to low interest rates and government surplus, however this has not yet happened. There have been changes made to the bond program to entice investors. Despite falling interest rates, Canadian investors are still buying Canada savings bonds.

In addition to the original savings bond, Canada also has what is called the premium bond. This was introduced in 1998 and has basically the same features as Canada savings bonds with higher interest. For the first three years, the interest rate increases and is guaranteed. After three years, the interest rate is variable until maturity. The premium bond is only redeemable on the issue date anniversary, however there is a 30 day grace period after that. These are also available in different denominations, and are available with regular interest rates or compounding interest rates.

Whether you choose one of the original Canada savings bonds or a premium bond, you can be assured that you are getting a low-risk investment security that has the backing of the Canadian government. As mentioned previously, these bonds make great gifts for kids and teens because not only do they grow in value, they introduce youngsters to the concepts of investing and money management.

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