I read in a local newspaper that the Central Bank of Barbados will be offering a savings bond issue. This is the sixty-eighth issue of government bonds, and they went on sale on Monday, 3rd October 2011. I’ve never bought savings bonds before, but I think that it’s a good long term savings tool.
A savings bond, according to the Central Bank of Barbados, is a five year security which gives you the opportunity to save money for five years and earn interest. Bonds are usually offered at a discounted rate. The bonds being offered by the Central Bank in this issue, will be sold at a price of $78.44 per $100.00 which represents a yield of 5.50%. For example, if you wanted to buy a one hundred dollar bond, you would pay $78.44. At the end of the five years when the bond has matured, you would receive $21.56 in interest which is free of income tax. One thing to note is that individuals can not hold more than $50,000 in savings bonds.
The bonds, officially known as Barbados Government Savings Bonds, are available in denominations of fifty, one hundred, five hundred, one thousand and five thousand dollars. If you’re interested, you should pay a visit to your favourite commercial bank and ask for an application form. After you’ve completed the form and made the payment, you are given a bond certificate which you should keep in a safe place. At the end of the five years, you will get back your investment.
If you want to cash in your bonds before the five year period is up, you can do so. But you will receive the money you paid and any interest which might have accumulated at that point in time. As with any important document, you should read the fine print on the back of the bond certificate which would give you information on the interest rates and applicable conditions.
Are you going to take advantage of this latest savings bond issue?