personal finance

I bonds

US Treasury savings bonds earning interest based on a fixed rate plus inflation — protecting purchasing power.

Example

“I bonds earned 9.62% during peak inflation protecting her savings from purchasing power erosion.”

Memory Tip

I BONDS — inflation-protected savings. Rate resets every six months with inflation.

Why It Matters

I bonds help protect your savings from losing value due to inflation, which is especially important during periods of rising prices. They offer a guaranteed minimum return through their fixed rate component, making them a safe way to grow money while preserving purchasing power over time.

Common Misconception

Many people think I bonds offer high returns like stocks or that they can access their money instantly whenever they want. In reality, they have modest returns and require you to hold them for at least one year, with penalties for early withdrawal within five years.

In Practice

If you buy a $10,000 I bond with a fixed rate of 1.5 percent and inflation is currently 3 percent annually, your bond earns 4.5 percent interest that period. After one year, your bond would be worth $10,450, but if you try to cash it before five years, you lose the last three months of interest as a penalty.

Etymology

From Series I savings bonds — I standing for inflation-indexed.

Common Misspellings

i-bondsI-bondinflation bonds

Related Terms

treasury bonds inflation

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