Advantages

• Interest is exempt from state and local taxes.

• Can be purchased at a "discount" (less than face value).

• Government securities are low-risk savings options.

• Series EE bonds may be totally tax free if the interest is used for a child's education.

• Series EE bonds may be available through payroll deduction.

Disadvantages

• The smallest initial investment for a T-bill is $10,000.

• You must pay federal tax on your interest earnings.

• The interest rate on Series EE bonds is no longer fixed but varies; newer bonds have a 4 percent minimum return.

• Once bonds mature they no longer earn interest.

Government securities are guaranteed by the full faith and credit of the U. S. government. They can be purchased for no handling fee directly from the Federal Reserve or for a fee from a broker or bank. Series EE and HH savings bonds and treasury bills reach maturity within a stated number of months or years. Interest yields and minimum investments vary widely among these alternatives. They stop earning interest upon maturity.

You may call the Securities Division of a Federal Reserve Bank for information on any type of U. S. government security (savings bonds, treasury bonds, bills, and notes) for a recorded message or to speak with a representative.