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Consider the lowly I Bond

US Savings Bonds have consistently gotten a bad rap. Over the years I purchased small quantities of bonds as the cornerstone of my emergency fund and for tax-free educational savings. Sure, most of the EE bonds I purchased in the mid-90s have earned 4%, which lag behind inflation. But, the I Bonds that I purchased in 2000 are earning more than 8% now! I want to know where anyone can get a guaranteed 8% rate right now on a short term investment?!

Now, to be accurate, the current rate, according to the US Treasury web site is 5.64% and bonds must be held for a minimum of 6 month. So how does that compare to 6 month CDs with purchase prices of less than $50,000? According to this week that rate was 2.07% and remember that it taxable!

So, if you an individual investor looking for some safe investment options, consider the lowly US Treasury I Bond.


2 thoughts on “Consider the lowly I Bond

  1. Bonds that require you to lock in your money for six months or more may not be the best idea for an emergency fund. I understand wanting a larger return, but what good is a few extra percentage points if you need the money in say 4 months? Many people would then have to go into debt because their emergency fund is inaccessible.

    Posted by Hugh H | January 10, 2009, 4:17 pm
  2. Great point, and you are absolutely right. I’d recommend this to someone who already was well on their way to building their emergency fund over a longer time period. Mine took a decade to build.

    Posted by Lee | January 14, 2009, 2:18 pm

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