No. of Recommendations: 2
And, to anyone who is excited about having gotten an I-bond before the rate change, don't forget in 6 months you'll be getting 2.57% for the following 6 months, unless you cash in and lose 3 months interest and pay your taxes. Glad I stuck to CDs.

At this stage of my life -- young; about to be married; no children -- the only thing I can see using savings bonds for is the less liquid portion of my emergency fund. For this role, I want a set-it-and-forget-it place to stash my money. My requirements for this investment are as follows: (1) principle is safe; (2) likely to return more than my brokerage account's MMF sweep; (3) no hassles. For me, savings bonds make a lot of sense in this role and over the next year or two, I plan to gradually move much of my emergency money to savings bonds.

Now...that said, I ran some calculations given the last 5 years of I-bond inflation rates and various fixed rates and compared these to the EE-bond rates for the same period. Granted, this is a limited sample size...but it appears that the "break-even" point where both bonds have the same average return occurs when the fixed-rate portion of I-bonds is at about 2.5% (actually slightly below 2.5% so far). At higher fixed-rates, you are better off in I-bonds; at lower fixed-rates, you are better off in EE-bonds.

Given this, I am thinking I should probably go with EE-bonds for my emergency fund "investments" over the next 6 months. Any thoughts from the bond masters?

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