As of today, the national average gas price is $5.01, with California having the highest at $6.43 and Georgia the lowest with $4.48. Compared to a year ago, the national average was $3.08, which is a 62.66% increase. With inflation currently around 8.6%–up 3.6% from a year ago in May–the gas pump isn’t the only place consumers are experiencing higher prices. This is especially uncomfortable for consumers because the Employment Cost Index (ECI)–a measurement of workers’ wage increase by the Bureau of Labor Statistics (BLS)–is 1.4. A 1.4% increase in wages is lagging behind inflation and increasing gas costs.

Inflation is causing consumers to mitigate increasing prices with various methods. Such mitigation includes being more conscious of their spending, cutting back, and prioritizing needs over wants, alongside other efforts. These methods can only go so far and can leave the best effort to save money futile with the increasing rise of inflation. One item that can help in the battle against high inflation and gas prices is I-Bonds, also known as Series I Savings Bonds.

WHAT ARE I-BONDS?

Forbes contributors Friedberg and Curry describe I Bonds as “safe investments issued by the U.S. Treasury to protect your money from losing value due to inflation.” The rates are calculated by adding a fixed rate and the inflation rate together to get the I Bond rate. The current I Bond rate is 9.62%, announced this previous May, and the next new rate announcement will be in November. I Bonds can be bought directly through the U.S. Treasury.

MORE INFORMATION

If you’re planning on buying I Bonds, you need to know that there is a $10,000 limit on how much you can purchase in a year. If you happen to purchase more than $10,000, the U.S. Treasury will refund the excess amount. Plan ahead so you don’t find yourself in this situation. You don’t want any portion of your money being in limbo (the time it takes for you to get back your money) not earning interest or being put to use. If you have an excess of $10,000 that you want to invest, take the time to find other investment vehicles that will help you meet your goals. They may not have a similar return as I bonds, but something is definitely better than nothing.

I Bonds are taxable at the federal level but not at the state and local level. According to the U.S. Treasury website, “Using the money for higher education may keep you from paying federal income tax on your interest.” It’s your responsibility to do the proper due diligence in tax planning so you don’t end up owing the IRS.

I Bonds can be held for 30 years while still gaining interest. If you choose to cash your I bonds before 30 years, you’re able to do so after one year. If you choose to cash out before five years, you’re penalized the last three months of interest earnings. This information will give you the opportunity to decide when is the best time to cash out that will be beneficial for your particular situation.

FINAL THOUGHT

There is only so much a person can do during historically high inflation, high gas prices, and slow-growing wages. The current economic environment may seem dim, but it is not hopeless. Now more than ever, people need to be mindful of their personal finances. We are driving through an economic storm, and the future seems uncertain, but that is no reason for us to lose our heads. This is not the first gloomy economical situation we’ve seen, and it won’t be the last. The ones that will make it through in one piece are the ones that are aware of the environment, aware of their financial situation, and willing to take a proactive role in their personal finance. 

I Bonds are only one tool among many others that can help us fight high inflation. There is nothing wrong with coming out with some scratches and bruises financially; the goal is to not be financially ruined or destitute.