Money Management

With a 5.27% yield, I bond interest rates are still rather high. But are they right for you? Read on for more information to help you decide. 

Series I Savings Bonds — more commonly known as “I bonds” — are designed to protect the purchasing power of your money from the damaging effects of inflation. And while these instruments come without risk and could end up paying quite a lot if inflation heats up, they aren’t perfect for everyone.

Here’s a quick rundown of the perks and potential drawbacks of buying I bonds in 2024 to help you decide if they’re the right fit for your saving and investing strategy.

Reasons to consider I bonds in 2024

I bonds that are issued from November 2023 through Apr. 2024 have an initial yield of 5.27%, which is guaranteed for the first six months and will be adjusted for inflation every six months thereafter.

The obvious reason to buy I bonds in 2024 is for the high initial yield combined with long-term inflation protection. Specifically, the 5.27% yield is a combination of a 1.3% fixed rate that will remain for the life of the bond, as well as an inflation adjustment, which when annualized produces the total yield of 5.27%. If inflation were to spike higher unexpectedly or stay elevated for a long time, your I bond yield would adjust every six months to compensate.

Potential I bond drawbacks to keep in mind

There’s no such thing as a savings or investment vehicle that is perfect for everyone, and I bonds aren’t an exception. Before you open a Treasury Direct account and start putting your money into I bonds, here’s what you need to keep in mind.

Withdrawal restrictions: One big downside you need to consider is that you cannot cash in an I bond for at least a year, and you’ll be hit with a penalty if you cash out within the first five years. Because of this, I bonds are most appropriate for people who won’t need their money for a while.If inflation disappears: While I bonds can be a great way to protect yourself from high inflation, it’s also important to realize that if inflation slows down, your I bond yields could end up lower.Purchase limitations: Direct I bond purchases are limited to $10,000 per person, per year. You can purchase as much as $5,000 in additional I bonds if you use your tax refund, but at most, any one person cannot purchase more than $15,000 of I bonds in a given year.Compare with other high-yield, risk-free vehicles: It’s important to compare I bonds to other risk-free savings vehicles. For example, while a certificate of deposit (CD) won’t necessarily help you if inflation spikes, you can find 1-year CDs through reputable banks with yields that are even higher than the 5.27% paid by I bonds as of this writing. I bonds are designed to pay more in an inflationary environment, but not necessarily in a high-interest environment. It’s entirely possible to have one without the other.

No perfect answer

Like most investment vehicles, bonds aren’t a great fit for everyone. If you’re looking to protect some of your savings that you won’t need for a while from inflation, I bonds could be a good fit for you. However, there are some significant drawbacks to keep in mind before you start buying.

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Thinking of holding out until Cyber Monday to load up on holiday gifts? Read on to see why you may want to rethink that strategy. 

The holiday season is right around the corner. And if you’re not so thrilled about that, you’re not alone.

For some people, the holidays are synonymous with stressful travel and too many parties for their own good. And then there’s the gift-giving aspect. Even if you’re a generous soul who enjoys showering the people in your life with presents, finding the right items at the right price is no easy feat.

This year, you may be thinking of waiting until Cyber Monday to do your holiday shopping. If you’re someone who generally prefers to shop online, that logic makes sense. Cyber Monday also tends to be loaded with deals, so waiting until then might result in saving money you can then add to your savings account.

But while holding out until Cyber Monday might seem like a good plan, here’s why you may want to rethink it.

1. You might pass up better deals along the way

You might assume you’ll snag ultra-low prices if you wait to do your shopping on Cyber Monday. But a lot of retailers are already offering great deals now. Target, for example, recently had a major sale.

Many retailers have price-matching programs in place so that if you buy something in early or mid-November, you can get refunded the difference if there’s a better deal to be had later that same month. So if you’re worried about jumping the gun, stick to retailers that offer this option — and hold onto those receipts.

2. You run the risk of the products you want selling out

Maybe you have kids whose wish lists include some of the most popular toys of the season. If you wait until Cyber Monday to scoop those items up, you may find that they’re already sold out. Or, you might have to pay a premium to snag them because at that point, you’re more desperate.

If you know you want to purchase a sweater for your Uncle John, then sure, by all means, sit tight until Cyber Monday. Chances are, there’s going to be inventory left. But if your child wants the hottest gaming system out right now, stop what you’re doing and start comparing prices.

3. You might get a better sense of the products you’re buying if you purchase them at the store

Maybe you’re hoping to buy your niece the perfect party dress, or you’re looking for a high-quality building block set for your nephew. It’s not always easy to determine what you’re getting when you buy items like these online. Going to the store might help you feel more confident in your purchases.

Of course, it’s common for online retailers to have reasonable return policies. So if you buy something on Cyber Monday that isn’t what you think it is, you’ll generally have the option to send it back. But by then, it’s probably very late November or early December and you’ll be in a rush to find a replacement. Why subject yourself to that stress?

There’s nothing wrong with planning to take advantage of Cyber Monday sales. But think twice before you decide you’re basically going to wait until the Monday after Thanksgiving to get the bulk of your holiday shopping done.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Struggling with gift ideas this year? Read on to learn more about an easy solution. 

The holidays will be here before you know it. If you’re ahead of the game on the shopping front, that’s something you may not be worried about. But if you’ve only managed to check a couple of items off of your holiday list, then you may be starting to get concerned.

Shopping for the holidays can be stressful for many reasons. First, there’s the money. A lot of people don’t relish the idea of seeing their credit card balances soar. There’s also the pressure to come up with the perfect gift for the people on your list. Even if you pride yourself on creativity, that may only go so far.

Amazon, however, might be able to come to your rescue. And it’s not just because the online retail giant has a massive range of products at what are often competitive prices.

Rather, Amazon offers a subscription box program that could take the stress out of gift-giving. And you may even want to sign yourself up for a recurring delivery so you have something in the mail to look forward to.

Have you explored Amazon’s subscription boxes?

Amazon’s subscription box program couldn’t be simpler. All you need to do is browse Amazon’s subscription box page, find a box you think is a great gift for someone special in your life, and then choose a delivery cadence, whether it’s monthly, every other month, or quarterly.

What sort of boxes will you find? Amazon offers a host of options for those who love gourmet food. And that’s a great gift to consider for a person in your life who has a smaller home with limited room for physical items. You’ll also find craft boxes, pet-centric boxes, boxes for sports fans, and more. Your best bet is really to look through the site and see what inspires you.

The cost of this program will depend on the specific boxes you choose. But as one example, Amazon has a chocolate lovers box that costs $19.99 or less per shipment.

So let’s say you’re looking for a great gift for your chocolate-loving mom and have a maximum budget of $150. You can sign your mom up for a box to come every other month for a year and know your cost won’t exceed $120.

A good option to fall back on

During the holidays, the people in your life may end up receiving numerous gifts. And yours might, unfortunately, get lost in the shuffle.

The nice thing about Amazon’s subscription box program is that you’re giving people the gift of having something to look forward to well beyond the holidays. And if you’re buying a box for yourself to enjoy, you get the flexibility of being able to cancel at any time, the same way you can easily cancel a shipment or subscription under Amazon’s Subscribe & Save program.

So let’s say money starts to get tight or you’re inspired to boost your savings account balance. If you’re no longer comfortable spending $30 on a box of goodies for yourself each month, just cut the cord.

The people in your life may be tired of getting the same old things for the holidays. If you want your gift to stand out, you may want to consider a subscription box so they’re getting a variety of items during the year.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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Buying points could lower your mortgage rate. But should you hand over that money? Read on to find out. 

Signing a mortgage has become a really expensive prospect. The average 30-year mortgage rate is now a whopping 7.76%, according to Freddie Mac. Compared to the rates mortgage lenders were giving out in 2020 and 2021, today’s borrowing rates are, in the eyes of a lot of people, ridiculously high — though interestingly enough, they’re not nearly as high as the rates lenders were charging back in the late 1970s and early 1980s.

But even though 7.76% may not be the highest the 30-year mortgage rate has ever been, you may be eager to do what you can to lower the interest rate on your home loan. One option, of course, is to take out a 15-year mortgage. Freddie Mac says that the average 15-year mortgage rate today is 7.03%. But that could result in a higher monthly payment that’s just not affordable for you.

Another option you can look at is buying points on your mortgage. This will allow you to permanently lower the interest rate on your home loan. And it’s a strategy that could make sense given today’s soaring rates — but only under the right circumstances.

How mortgage points work

Technically, mortgage lenders can assign their own benefit and cost to mortgage points. But generally, a single mortgage point costs 1% of the loan amount you’re taking out. And a single mortgage point will usually result in a 0.25% reduction in your loan’s interest rate.

So let’s say you’re signing a $200,000 mortgage. One point would cost you $2,000. If you’d normally qualify for an interest rate of 7.76%, you’d instead potentially be looking at a rate of 7.51%.

Is it worth it to buy mortgage points?

It could make sense to buy mortgage points today if you plan to stay in your home for a long time. But if you’re buying a starter home, you may not end up staying in your home long enough to make up for that initial outlay.

Let’s say that instead of signing a $200,000 mortgage at 7.76%, you spend $2,000 to shave your rate down to 7.51%. Instead of a monthly payment of $1,435 for principal and interest, you’ll have a monthly payment of $1,400.

It will take you 58 months to come out ahead financially in this situation because you’ll have spent $2,000 to save $35 a month. If you plan to stay in your home for well more than five years, then clearly, that $2,000 investment is a good one.

However, if you’re buying a starter home, you may only end up being in that home for four years, or 48 months. So in that case, you’ll lose out financially by handing over $2,000 to only save $35 a month for four years. That’s just $1,680 in savings.

At a time when mortgages are so expensive to sign, buying points is an option worth looking into. Just make sure to run the numbers and think carefully about your long-term plans before making that decision.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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