126 - Series I Bonds: My Inflation Protected Emergency Fund

The DIY Investing Podcast

Mental Models discussed in this podcast:

• Inflation
• Emergency Fund

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Show Outline

The full show notes for this episode are available at https://www.diyinvesting.org/Episode126

Series I Bonds

• Current Yield: 7.12% (through April 2022)
• Re-rates every 6 months according to an inflation index (not sure which one)
• Combination of a fixed rate (currently 0%) and a variable interest rate.
• Maximum of $10k/year per person.
  • On a calendary year basis.
• Available for purchase on TreasuryDirect.gov

Emergency Fund

• Need Liquidity
• Principal protection
• Normally lacks inflation protection (nice to have, not a need)
• My plan:
  • 50% savings account
  • 50% Series I Bonds
• Take a few years to move into the I Bonds slowly to limit liquidity risks
• Normal recommendation is 3-6 months of expenses. I like 12 months as a long-term goal.

Summary:

Series I Bonds are an inflation protected security issued by the United States Government to individual US Citizens. These non-marketable securities offer interest rates comparable to inflation and are an ideal asset to include in an emergency fund.