A savings bond is a type of savings product offered by the government or financial institutions that allows individuals to lend their money for a fixed period in return for interest.
It’s typically a secure and low-risk option commonly used for saving money.
Savings Bonds Example:
If you’re looking for a way to build your savings, you could purchase a savings bond from a bank or the UK government. This bond could state that you will lend them £1,000 for a period of three years.
During this time, the government will pay your interest on your bond, let’s say at a rate of 2% per year.
At the end of the three years, you will receive your initial £1,000 back, plus the accumulated interest. In this example, you would receive £1,060, which includes £60 in interest earned on your savings bond.