Have you noticed the interest rates banks are paying (or not) these days? My friendly bankers are offering anywhere from .5% to .75% on CDs. Money market funds and savings accounts are even more anemic at around .1%. Pretty soon they will have to rename the latter the “non savings account.” If you have any money, banks want to use it for free.
This leads to the small world of savings bonds. I actually purchased the paper I Bond maximum, $5,000 per person per year, in December and will do so again in January. Here is why. The current I Bond pays 3.36% for the first six months and has to be held for one year. If cashed at the end of the year, three months interest is forfeited. Because the I Bond will receive 3.36% for the first six months, even if the rate is 0% for the second six months, the worst I can do is an annual return of 1.68%, guaranteed, tax deferred and exempt from state and local taxes. If inflation is somewhat normal (around 3%) for the second six months that my bonds are held I will net more than 2.52% after one year. This is not going to make me rich, but it feels better than loaning my bank money at a near zero percent return.