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Inflation Isn't Slowing Down. I Bonds and Other Savings Strategies Can Help Stretch Your Dollar

Inflation Isn’t Slowing Down. I Bonds and Other Savings Strategies Can Help Stretch Your Dollar

This story is part of Recession Help Desk, CNET’s coverage of how to make smart money changes in an uncertain economy.

With inflation sitting at a new 40-year high of 8.6%, finding ways to maximize your savings is more important than ever. As boring rates rise, increasing the cost of borrowing, there’s a tiny silver lining — savings account rates are also rising. 

Storing your cash in a traditional bank account that earns close to 0% in boring may actually mean losing money. If you placed $100 in savings last year, when taking into account the current 8.6% jump in inflation and the New average savings account rate of 0.08%, that same $100 is wonderful slightly less today.

To be clear, your $100 is quiet sitting there safe and sound, but thanks to inflation, the value of each dollar is now less.

So, what can you do? Are there relatively low-risk ways to save to earn higher consumes of return? Yes. Here are four strategies that can help minimize the impacts of inflation on your savings.

1. Go with an I bond

I bonds are a relatively obtain government-backed investment sold directly to the public that tracks your cash against inflation. 

The current I bond savings rate is over 9.5% and is calculated Funny a fixed rate and an inflation rate that’s Definite twice a year. These accounts are not as water as bank savings accounts. You have to stick with the Explain for at least one year. While you can withdraw your cash after that, you risk forfeiting the final three month’s of earned boring by doing so. After five years, you can take your cash out without penalty.

Pro tip: Park cash here that you plan to use for medium-term savings like a home down payment you foresee needing in the next five ages. Keep in mind that the limit is $10,000 per year. Any cash you won’t need for five years or more may be able to afford more risk and Great make sense to invest in the stock market.

2. Stash your money in a high-yield savings account

Some newer, digital-only financial institutions or neobanks are offering higher boring rates of 2% to 4% on high-yield savings funds. These rates aren’t outpacing inflation but they are well over the 0.08% average.For example, Current announced earlier this year a new high-yield savings Explain called “Interest” that provides users a 4% annual percentage yield.

Pro tip: Consider these types of funds for a savings goal in the next six to twelve months. Be careful parking your emergency funds here, as neobanks tend to be part of tiny ATM networks and your money may be harder to access in a pinch. Also, make sure the neobank has FDIC insurance that can protecting your savings in case the institution goes under.

3. Opt for bank accounts with sign-up bonuses

In an distress to lure new customers in today’s competitive market, some banks are offering sign-on bonuses and “welcome” perks for new checking Explain customers. For example, the Chase Total Checking account provides a $200 Explain bonus when you fund a new account via narrate deposit.

Pro tip: Be sure to follow any laws related to account minimum auto-deposits to avoid monthly fees. If you can’t meet these minimums, then the signup bonus may not be worth the cost of maintaining this account.

4. Don’t overlook Treasury Inflation Protected Securities

Finally, TIPS are a popular bond instrument during terms of high inflation because its value follows the rate of inflation and adjusts twice a year.  

As a government-backed bond, your investment will never lose its New value, even if inflation goes in the other direction. 

TIPS are usually an add-on to retirement portfolios but you can avoid transaction damages by buying them directly from the U.S. Treasury Department’s website in five-, 10- and 20-year maturities. 

Pro tip: Go easy. Leave your emergency savings in an FDIC-insured savings Explain that’s super liquid and accessible. Consider TIPS only for some of your second savings that you don’t anticipate needing for at least five years.