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Here's a Way to Earn Decent Interest on Your Excess Savings!

Here's a Way to Earn Decent Interest on Your Excess Savings!

June 03, 2021

I Bonds help savers stay ahead of creeping inflation

While most of us are earning near 0% on our savings accounts and money markets, the cost of living continues to grind higher.  That leaves our “safe money” cash savings actually SHRINKING IN VALUE.  What can you do about it? 

Sure you can invest the money, but what if you want some money set aside in a nice safe place, free of market risk?  We know stocks are always subject to volatility, and even relatively safe bond markets can sell off when interest rates or inflation are on the rise.  (the bond market index is down over 3% this year).  It is nice to have some money in a safe place – but earning 0.00001% isn’t very appealing!

Here is one idea for cash hoarders to earn some decent interest.  Buy US Government I bonds.

What is an I-bond? 

It’s a savings bond which pays interest based on two components.  There is a fixed rate (currently 0%) and an INFLATION ADJUSTMENT (hence the “I” in I-Bond) which is currently 3.54% for bonds purchased between May 2021 and Oct 2021.  Both rates are reset every 6 months based on prevailing interest rates and the change in consumer prices. 

This is a way that you can at least keep up with inflation with your cash savings without taking on any market risk. 

There are a few catches. 

  1. There is a $10,000 limit per person. But a couple can invest $20,000 and a family of four could invest $40,000!  And you can also invest an ADDITIONAL $5000 using proceeds from your income tax refund. 
  2. You need to hold the bonds for at least 12 months, and if redeemed after less than 5 years, you will surrender the last 3 months worth of interest (which is not so bad). They will continue to pay interest for 30 years.
  3. You need to open an account at to purchase I bonds. They can’t be purchased in a brokerage account with your other investments. 

Here is a link to the US Treasury site where you can learn more about how to invest in IBonds.

Enjoy your summer!