2009 Money moves: Grab some I Savings Bonds
...wait, is that right? US Savings Bonds and making money in the same sentence?
Yes, it is. I walked into my local savings bank yesterday and while filling out my deposit slip, the towering sign of current interest rates for various investments caught my eye. It was quite a depressing sight.
A one-year CD was offered at just above 2%, and the five-year hung around 3%. Like most of you, after opening my monthly statement from my financial planner showing the returns from my 401k or IRA in 2008, I was already looking for a better place to put my savings. The only interest rate that caught my eye, and probably yours the next time you look, was the highest one on the board: the Series I US Savings Bond.
Who would have thought the US Savings Bond could excite an investor? A patriotic choice, for sure, but it's also topping all the other investments with a gigantic 5.64% annual interest rate. Not an all-time high, but compared to the alternatives, an appealing investment.
I searched for the best interest rate currently offered in other secure investments this morning and came up with a minimum investment of $10k in a jumbo 5-year CD, but it paid only 4.05% (*source: bankrate.com Jan 7th, 2009). The I Bond beats this rate by more than one and a half points. You can invest as little as $25, and take your money out of it after only one year. (One drawback for people with more money to invest: you can only purchase $5,000 in I Bonds each year).
Some other great things about I bonds to note for 2009 -- the I stands for Inflation-Protected, so rest assured your money will keep pace with the world around us even if other bonds, stocks and the housing market continue to slump. And, if you choose to not redeem your I bond after a year, it will continue to earn interest for up to 30 years (if you sell before you've owned it for five years, you'll forfeit the past three months interest). Just make sure you stay on top of your savings bonds like all your other investments, because the I Savings Bond interest rate can change every six months.
Jack Quinn is a personal finance writer and editor for SavingsBonds.com. Jack has helped Savings Bond owners better understand their investments for more than 15 years, saving clients from mistakes which could cost them thousands of dollars.