Glossary
I bond
An I bond is a US savings bond whose rate combines a fixed rate for life with an inflation rate reset every six months, so it keeps pace with inflation; you can buy up to $10,000 a year.
I bonds can't be cashed in for 12 months, and cashing in before five years costs the last three months' interest. Interest is taxed federally but not by states, and can be deferred until you cash in.
Work it out
Related terms
- Treasury billShort-term US government debt, maturing in 4 to 52 weeks, sold at a discount to its face value; the difference is your interest, which is exempt from state and local income tax.
- Compound interestInterest earned on both the original amount and the interest already added to it, so savings (and debts) grow faster over time than with simple interest.
Sources: TreasuryDirect: I bonds