I bonds: A bright side to inflation

The historic surge in inflation last year kept interest rates on I bonds blazing for months and some analysts say it could get better in 2023. But first, what are I bonds? I bonds are government-backed securities whose interest rate is determined by the inflation rate. When inflation is low, I bonds aren't always the best bet, because even though they have little risk, low inflation means low-interest rates. But right now, inflation is at a multi-decade high and I bonds are paying generous yields. According to the Treasury’s data, over $22 billion in I bonds were sold via TreasuryDirect in 2022. I bonds bought today will pay an interest rate of 6.89% for the next six months. And if inflation keeps going up, savers receive potentially higher rates every six months. But if inflation falls, I bond rates will go down. One important thing to note is that with I bonds, you can't get your money back until after the first year. So you shouldn't invest any funds you'll need soon. After one year, you can decide if you want to cash your I bonds, or continue saving. I bonds were introduced in paper form in 1998, but have become increasingly popular in electronic form. More so in the last 12 months as inflation surged. They’re one of the few bright sides to rising interest rates, and they offer savers the chance to get a decent income from interest-generating investments while also reducing risk. For more on how to get started with I bonds, check out this article. This would make sense in the future, but could be very costly to the lender.