“It’s a good idea to save enough emergency money for at least three months,” says Ronald Van Surksum, certified financial planner and member of AAM Fee-Only Financial Planning & Investment Advisory LLC. Unexpected, long-term illnesses, like Covid or cancer, or auto crashes or many other accidents often take more than a few weeks to recover from injuries.
Bills keep coming no matter how long you’re off work
Could you make it through a whole year without your usual paycheck? What if you lose your job during a multi-month recession? How would you manage if the economy takes a downward turn for other reasons, your job is eliminated or becomes obsolete? What would you do if you’re fired? Without great references, it could take a long time to find new work . . . whether you were fired fairly or not.
The lucky ones (or the smart folks) don’t need to fret. They’ll have a Plan A, or a short-term emergency fund, and a Plan B to build up secondary cash reserves for longer stretches. “U.S. government Series I Bonds (I Bonds) are one of the best ways to survive long-term emergencies, such as layoffs, or debilitating disabilities,” says Van Surksum. Look at I Bonds as flexible-term, variable-rate Certificates of Deposit, or CDs. You’re required to hold I Bonds for at least one year; then,cash them in after 365 days or keep them for up to 30 years.
“I Bonds bring in a great yield,” explains Van Surksum. Currently yielding 9.62 percent, I Bonds can be purchased online through October 2022 at the current rate. Those earnings will apply for six months after purchase. For example, if you bought an I Bond on July 1, 2022, the 9.62 percent rate would be applied through December 31, 2022. You can cash them in after one year, or keep earning a good return if you don’t need them that soon.
You can put up to $10,000 into I Bonds per person per year
I Bonds are sold online at treasurydirect.gov Minimum purchase amount is just $25; maximum annual investment can be up to $10,000 per person per year. Interest is compounded semi-annually every year with a combination of a fixed rate that stays the same for the life of the bond and an inflation rate that is set twice a year. For bonds issued from May 2022 through October 2022, the combined rate is 9.62%. While I Bonds make long-term sense as secondary emergency funds, they can also be used to:
- Help pay educational expenses
- Give as graduation or wedding gifts
- Supplement your retirement income
- Save in a low-risk product that helps protect your savings from inflation.
To find out more about investing in I Bonds, make an appointment at aamllc.com or call 616-531-5220.
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Ronald Van Surksum, CFP
4555 Wilson Ave SW – Suite 2 Grandville, MI 49418
Phone: (616) 531-5220 Cell: (616) 450-8439
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