The savings bonds is a one-time investment at a bank with which you can invest a sum of money for a specific term of one to ten years at a fixed interest rate.
The interest rate of the savings bond can be staggered over time: its amount depends on the selected term and the offering credit institution. In addition to the annual interest payment, savers can also choose the so-called accumulating investment. This means that the interest accumulates until the end of the term and is only then paid out.
Since the term of a savings bond usually extends over several years, this is referred to as a medium-term investment horizon. A termination before the end of the term is usually excluded or only possible with a loss of interest.
Possible goals: When can a savings bond be a sensible investment for me?
Savings bonds are among the deposits. They are a way of saving if you prefer a medium-term investment. However, you should be sure that you will be able to dispense with the sum invested during the term. Because a prior disposal of the saved is only possible with a loss of interest or even completely excluded. However, it is possible to borrow a savings bond and use it as security for a loan taken out. A savings bond can also be an interesting form of investment if you want to build up assets or save something for your retirement provision .
Risks: What are the risks?
Exchange rate risk / business risk: There is no interest rate risk as the interest rate is contractually fixed for the entire term of the purchase.
Foreign currency risk: This risk does not exist because you are buying the savings bonds.
Issuer Risk / Credit Risk: If you invest more than this, a risk may arise. Inquire about the deposit protection system of the bank or savings bank before concluding the contract.
Availability: You cannot dispose of the money early during the term. You can, however, borrow a savings bond and use it as security for a loan you have taken out.
Income risk: If interest rates rise significantly on the market, the saver will not benefit: because the interest rate and term are contractually agreed. This means that you are contractually bound to the lower interest rates and you cannot renegotiate any market-appropriate interest rates. But even falling or negative interest rates do not change anything in the agreed interest rate. In contrast to a fixed-term deposit, the savings bond can contain a so-called subordination agreement. This means that the statutory deposit protection does not apply to such a savings bond. If the bank becomes insolvent, you will not be reimbursed the USD 100,000 usually. “guaranteed. In addition, your claims from the bankruptcy estate will be treated subordinately. That is, other creditors will be compensated before you. For the higher risk, however, you usually get higher interest rates.
You should therefore check carefully whether a savings bond with a subordination agreement is suitable for you. Only entrust your money to providers whose seriousness there is no doubt.
What about the performance, profit and benefits of the savings bond?
Depending on the term, you will receive an interest rate based on the respective market interest rate, i.e. the refinancing rate of the credit institutions. You agree on this interest rate when concluding the contract. It is then binding for both contracting parties for the entire term. If the interest rate falls on the market or if there is even a negative interest rate, you can still be sure of the agreed interest rate until the end of the contract. Since a fixed interest rate has been agreed, you already know at the beginning of the investment what interest you can calculate with at the end. When buying a savings bond, there are usually no fees that reduce the interest gain.
NOTE: Bear in mind that savings contracts with longer terms bring higher interest rates, but you will only be able to dispose of your money after several years.
What obligations do I have towards the financial institution?
As a saver, you generally have no particular obligations to fulfill. However, you must cancel your savings bond if the contract provides for an automatic new investment at the current market interest rate and you do not want this. Otherwise you cannot dispose of your money.
Where can I take out a savings bond?
You can get information and advice in the branches of banks , but also online on the Internet or by telephone from the respective provider. You can then also conclude the contract for your savings bond there.