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U.S. Savings Bonds... What's Old is New Again!

The nightly news seems to carry much gloom and doom about inflation, exploring how the cost of various items are on the rise. The economy cycles through boom and bust times. For a very long time, interest rates were at an all-time low, resulting in lots of cash available for loans. Borrowers benefitted while savers suffered. In a pretty sudden turn about, it has become increasingly more expensive to borrow, but simultaneously, interest rates on savings have increased. There has been a resurgence of interest (pun intended) in U.S. Series I Savings Bonds offered at https://www.savingsbonds.gov. 

This essentially risk-free investment is backed by the full faith and credit of the United States government. When you purchase bonds, you are lending money to the government and they will pay you back with interest. You can allow your interest to be reinvested and the bond can be held for up to 30 years, tax-deferred. You can't cash them within the first year of ownership and if you cash within the first 5 years, you lose 3 months worth of interest. Most bonds are now held in electronic form, you can request up to $5,000 in paper bonds if you are due an income tax refund. Interest rates are adjusted every May 1 and November one and comprise two different rates. A base rate set for the life of the bond, and inflation rate based on current inflation. For the current 6 month period bonds are paying fixed .4% and inflation 6.49%. 

If you decide to take the plunge, you could break your investments into smaller increments such as $100, $250, or $500. Savings bonds could be a fabulous backup to your emergency funds held in liquid accounts. The idea being to keep 2-3 months of living expenses in a bank or credit union account and as you save beyond that the balance could be saved in higher interest, longer term accounts.