State and local government entities also offer options for long-term savings with suitable returns on investment.Though the gains and interest rates are substantially lower than mutual funds or even CDs, government securities (i.e.: bonds, certificates, or bills) are guaranteed to be repaid with interest or earnings on your purchase as scheduled by the agency that offers them. Other government-managed savings vehicles are designed for special segments of the population who need education and assistance to start budgeting and savings plans; those interested will have to meet special financial circumstances to qualify (see below).

By purchasing these securities, you are essentially making a loan to a government entity, which needs the funds the funds to operate much needed government programs or procedures. Your repayment terms and returns may vary by each type of security, but here are a few to consider when starting a savings plan:
  • US Savings Bonds: Savings bonds can be purchased in amounts ranging from $50 to $10,000 for a percentage of their value at maturity. Minimum returns are always guaranteed, and are not taxable. You can cash in a savings bond after 1 year, but they continue to earn interest for up to 30 years.
  • Treasury Bills (T-Bills): These have much shorter terms than savings bonds---treasury bills are paid back to you in one year or less, with interest on the principal. Treasury bonds are purchased below face value at the beginning of the term, and then are cashed in for face value at end of bill term.
  • Tax-Lien Certificates: A lesser known government-backed certificate, tax liens are offered by county in states that use them to recoup lost property taxes (not all states are "tax lien certificate" states). The certificates are offered in varying amounts based on county liens. When a homeowner fails to pay property taxes in a county that offers tax lien certificates, you are essentially purchasing their debt to the county. In return, the county will pay you back at the end of the certificated term along with high rates of annualized interest, or once the homeowner pays back property taxes, the interest accrued and the penalty---both of which you receive for your original investment.

Low-income Savings Plans

Finally, a government entity may team up with non profit organizations or corporations to offer Individual Development Accounts (IDAs), special accounts for low-income families to set aside funds for education and job training, home purchase, or other long-term goals. Typically, the funds saved are matched by public or private organizations, provided that mandatory money management, credit, or budgeting courses are attended.

With all of these savings options (also see "Part I" through "Part-IV"), it is important that you understand what you are saving for and how to apply the appropriate accounts to match these goals. See the article "Savings Goals" for more information.


References

Moneywise.Help Your Savings Grow

FCIC.Personal Financial Fitness