You would think that a country with the lowest savings rate amongst all of the other industrialized nations of the free world would do more to encourage its citizens to save money. After the US Treasury Department's announcement of higher I bond rates on November 3, you start to ask yourself: Should I spend my money, or save it and earn more?

On December 3, 2007 the US Treasury Department announced it would be reducing the limit on the amount of savings bonds an individual can purchase, to $20,000 annually, effective January 1, 2008. This means that one person can purchase up to $5,000 out-of-pocket of paper EE, paper I, electronic EE and electronic I bonds.

The limit prior to the change was a grand total of $120,000, (or $30,000 each type,) six times greater than the new limit.

With the low rate of 1.30%, the EE bond doesn't look like it is going to get too many takers this 6-month period. There has even been talk from analysts in the savings bond industry that the government is trying to eliminate the EE bond by setting the interest rate so low. Obviously that is hardly the case, as EE bonds have a set formula based on other factors related to Treasury securities, and are not assigned without the proper calculations.

Most bond owners are now focused on the I bond, with its well-above-average annual rate of 5.64% that was announced on November 3, 2008. This is a great improvement over the last 6-month period and it even outperforms some of the highest 5-year Bank CDs we could find online by 50 basis points.

The government has defended its change by saying that individuals can now purchase not only paper savings bonds but also electronic ones. It also said in its release that 98% of individuals are buying $5,000 or less a year, so only a few people are actually affected. Well, nobody can accuse the government of not trying to come into the internet-age by forcing people into electronic bonds.

According to the government, electronic bond sales only make up about 7% of all bond sales, so the idea is off to a slow start, considering its inception five years ago. But hopefully the new administration will be a little more forthcoming about such major changes than the old one.

John Quinn is the CEO and Lead Content Writer for SavingsBonds.com in Spring Lake Heights, NJ.