I-Bond/Emergency Savings - Dan Caplinger, Robert Brokamp, CFP(R)


I am not able to ask this question while the financial planning hour occurs. Can you have this question posed to Dan Caplinger, Robert Brokamp, CFP(R) during their financial hour?

What does one think about taking 1/3 of their emergency fund & buying an I-Bond with it? Two incomes of nice salaries (not super nice, but nice). One with a job that will not go away so one is safe. The other with an awesome job, & most likely safe but recession could affect anyone. What are thoughts on this move if you feel safe with your situation, & can continue putting $ into emergency fund to backfill what you took out for the I-Bond?


Hi Rich -
The only issue I’d have with an I-bond in an emergency fund is that you have the initial 12-month period during which you can’t redeem it. After 12 months, you can redeem and pay a 3-month interest penalty, which isn’t ideal but still leaves grabbing the 9.62% rate for the first six months (if you buy an I-bond in October) look attractive.

I can’t give you specific advice, but someone keeping 2/3 of a sizable emergency fund liquid while taking 1/3 and locking it up for 12 months to get a higher interest rate seems reasonable to me in general. Obviously it depends on each person’s individual circumstances, but it sounds from your description as though you’re comfortable with the size of your emergency fund and the chances of your needing to tap it in the next year.



Hi Rich -

Have you considered a HELOC? I’m not sure if you own real property, but I would consider this:

  1. Apply for a HELOC at a financial institution that has competitive rates, low/no fees. Request a loan amount that you would need for your emergency fund (or some portion of it that you would rather invest in I-Bonds).

  2. Once you’re approved for the HELOC, then you can (much more safely) invest in the I-Bonds knowing that you have a backup plan in case of an emergency.

With I-Bonds paying high interest right now, and prime at 5-something, this looks like a good strategy to me - as a matter of fact - we’re doing it!!!

I’d be interested in feedback on this, as our financial advisor suggested it and it makes sense to me.



You presumably would choose an i-bond for its safety and higher return.

How large emergency do you anticipate? How likely are you to need the i-bond funds? Can you cover with credit card etc? This is all personal decisions. How much risk can you tolerate.

Apply for a HELOC at a financial institution that has competitive rates

Just be aware that the I-bond interest rate resets every 6 months. If inflation drops significantly in the next 12 months, one might only get a marginal benefit, and if HELOCs spike like mortgage rates are (@7%!) you’re left with needing to pay off a HELOC at a higher rate than the decreased-rate I-bond.