HOUSTON - High inflation has been a problem for most budgets, but it may offer a money-making benefit to those who have some cash to spare. We're talking about Series-I savings bonds, where the interest rate is tied to inflation, and a deadline is fast-approaching to take advantage of some historic savings.
Houston financial planner Danny Ratliff says that interest in I-Bonds has skyrocketed since the Treasury Department announced in April that the six-month rate of return would be 9.62%, the highest since they were introduced in 1998.
"For the first part of this year, $17.5 billion was invested, so they've taken quite a bit of interest," said Ratliff.
They are designed to protect your cash against inflation, hence today's high rate of return. The Treasury Department adjusts the rate every six months and the next change is November 1.
So, how do they work? There will be little surprise that the government has a complicated formula to compute interest. At its most basic level, however, a holder of a $1,000 I-Bond, earning 9.62% interest, would have an extra $96.20, after a year at that rate. The bonds also have compounding interest, meaning they earn interest on the accumulated total.
There are rules to be aware of, of course. First, I-Bonds must be held for at least 12 months. If they're cashed out before five years, they will lose three months worth of interest. Still, with investments available from $25 to $10,000 each year, financial experts think it's a good place to protect any extra cash you may have.
"We don't think this is going to be a great investment forever," says Ratliff. "But for a year, or two, this is a great place to put funds. You're going to get quite a bit more than you would get in a traditional savings account, or what we could find in a normal bond, for that matter."
Those interested in the I-Bonds' historic rate must invest by Friday, October 28. The Treasury Department will announce an adjusted rate on November 1, which is likely to remain elevated. Acquiring bonds can be accomplished from the comfort of your computer by clicking here.
If you have old savings bonds, gathering dust, you can check their current value by clicking here.