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Emergency money is to provide you a way to deal with unexpected surprises that life offers you. However, this fund has to be liquid otherwise it is of no use. Liquid cash is something you can access when the need arises.
Liquid cash means making low risk investments; and low risk investments means getting low returns. Most government bonds are considered as low risk investments as these bonds are guaranteed by the government and the chances of default are drastically reduced. One of the best ways of keeping liquid cash is investing the money in multiple government bonds with spread out maturities. This strategy reduces the interest rate risk and keeps the cash flow fluid.
There are certain government bonds with high interest rates. These bonds are known as I-bonds and are guaranteed by the US Treasury. The best part is that these government bonds earn one of the highest interest rates at 3.39 percent, and in addition, the money is completely safe.
I-bonds ensure that your savings are safe from inflation and while you own the bonds, you will earn interest on them. These bonds can be purchased online through the US Treasury website and you do not have to pay transaction fees when you make the purchase.
You can sell I-bonds 12 months owning them and you will not just receive the original purchase price but also the interest earnings. However, if you sell the bonds within the first five years of purchase, you will lose the interest for the last three months.
I-bonds are an excellent way of investing a certain percentage of your liquid cash so that you earn high interest rate while ensuring that you keep building your fund reserve.
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