Reinventing Savings Bonds

Tufano, Peter and Schneider, Daniel (2005) Reinventing Savings Bonds. In: Harvard Business School Working Paper, no. 06-017.

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Savings Bonds have always served multiple objectives: funding the U. S. government,
democratizing national financing, and enabling families to save. Increasingly, this last goal has
been ignored. A series of efficiency measures introduced in 2003 make these bonds less attractive
and less accessible to savers. Public policy should go in the opposite direction: U.S. savings bonds
should be reinvigorated to help low and moderate income (LMI) families build assets. More and
more, these families’ saving needs are ignored by private sector asset managers and marketers.
With a few relatively modest changes, the Savings Bond program can be reinvented to help these
families save, while still increasing the efficiency of the program as a debt management device.
Savings bonds provide market-rate returns, with no transaction costs, and are a useful commitment
savings device. Our proposed changes include (a) allowing Federal taxpayers to purchase bonds
with tax refunds; (b) enabling LMI families to redeem their bonds before twelve months; (c)
leveraging private sector organizations to market savings bonds; and (d) contemplating a role for
savings bonds in the life cycles of LMI families.

Item Type: Conference or Workshop Item (Paper)
Keywords: taxation; savings; investments
Date Deposited: 28 Oct 2011 08:40
Last Modified: 07 Oct 2015 05:45

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