🦉 Hidden in plain sight—a 7% yield on a US savings bond
November 23, 2021
The Gist
TOGETHER WITH

It's Tuesday again! Can you guess what's the best 1-year CD (certificate of deposit) rate or APY you can get this month, according to Bankrate.com? a. 0.65%, b. 1.85%, c. 3.05%. Follow the 🌊 below for the answer.

Here are today's money topics:

  • A best kept investing secret hidden in plain sight—a 7% US savings bond
  • The fintech industry relies on the traditional banking infrastructure
  • Better together? Open enrollment power tips for spouses

INVESTING

A best kept investing secret hidden in plain sight—a 7% US savings bond

Some of the best principles to abide by in life are seemingly ironic truths. Letting go of something you want, less is more, buying the dip, and the fact that oftentimes, the best-kept secrets are usually public information for anyone to find. 

Wait, what? The concept of being hidden in plain sight is very real, because who’s going to come looking for something that’s not hiding? The world of investing is no exception to this, and we’ve recently unearthed a somewhat forgotten gem that could be one of the best-kept secrets in investing.

Bonds for dinner again, Finny? 

Yes, we're back at it with the bond talk, but not just any kind of bond... we're talking about the government savings bond referred to as Series "I" (I for inflation) offering an eye-popping 7.12% rate of return on bonds issued between November 2021 and April of next year. 

The fun stuff you should know first

  • Basics: Series I bonds are one of two kinds of savings bonds issued by the US treasury. They come with a rate in two parts, the first being a fixed portion of the rate (currently 0%), and the other being an inflation-adjusted number, changing every 6 months by the Treasury. Think of them as inflation-protected savings accounts backed by the full faith and credit of the US government.
  • Important info: Series I bonds can become exempt from multiple layers of income taxes if redeemed and used for qualifying higher education expenses in the same year. You’re also limited to how much you can buy, specifically $10,000 per social security number per year ($20K for married couples), and an extra $5,000 with tax return money. You also can’t purchase them in an IRA, nor can you redeem them within 12 months of purchase, and redeeming them prior to 5 years gets you a penalty of 3 months interest. 
  • Perspective: Since they usually can't be cashed out before a year of holding them, think twice before investing cash you might need immediately. Also, evaluate I bonds to comparable options like a 12-month CD or TIPS (Treasury Inflation-Protected Securities).
  • Other types: Their counterparts—EE savings bonds—come with a fixed rate and are guaranteed to double in value over 20 years. They're low risk and you're giving up the potential upside of Series I bonds by playing the super conservative long game. 
  • Inflation warning: Series I bond rates go up as consumer prices do. Because the interest rate on these bonds is dependent on inflation, that means it can be a little misleading, and potentially be lapped by either rising prices or failure to redeem them in time. 
  • How to buy them: You'll have to buy them directly from the , and while you're there, TreasuryDirect websitecheck out all the FAQs and resources they have available.

💭 Thinking you'd benefit from a quick refresher on inflation? If so, take this quiz-based lesson:

FINTECH INDUSTRY

The fintech industry relies on the traditional banking infrastructure

User experience is an important part of anything we consume, but it can also serve as an illusion sometimes. A lot of brands and businesses engage in white-labeling, where they rely on another provider's infrastructure to build out their product while labeling it as their own, to build out their user base. 

We see this in every industry. Most supermarket store brand products are provided by companies that sell to multiple supermarkets, changing only the labels. Retailers and drop shippers buy clothes from the same overseas manufacturer just to slap a different logo on them. It’s a seemingly innocent practice, but it’s something worth being aware of because it can involve our money too.

How this manifests in fintech

Earlier this year, Robinhood rolled out a banking service integrated into their mobile investment app and even gave those who signed up a debit card to access the funds. Many users might understandably think it’s really cool that Robinhood is now a bank too, but no, they’re not. 

That app feature actually relies on FDIC-insured, Sutton Bank, to hold your cash, and they also depend on JPMorgan Chase to handle all of your ACH transfers. These are called partner banks, and what Robinhood is doing is called “sweeping” the funds to them. And this is just one example of how this practice is proliferating through the industry.

Online banking services are a dime a dozen nowadays, and most of them rely on similar practices and partnerships with other banks to do business. (Hint: look up Bancorp Bank, which partners with big names like Chime, SoFi and more.)

How do they make money? The vast majority of them do so via interchange fees that merchants pay to banking service providers when customers use their debit or credit cards.  And beware, some also make a hefty buck charging out-of-network ATM fees.

What does this mean for us as end-users? For now, not much. Simply understanding where your money really lies is just another way of being prudent.

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WORK BENEFITS

Better together—open enrollment power tips for spouses

Open enrollment is a period of time—usually from around November 1st to January 15th—when US employers enroll in the benefits offered at their work for the following plan year. 

As US employers have added more benefits this year in an effort to stay competitive in recruiting and retaining employees, it's worth putting in the time and effort to compare your and your spouse's benefits when evaluating which to signup for.

So, we thought we’d bring offer some power tips to the Thanksgiving dinner this year.

No stuffing, just the most important things

  • Compare which plan gives you the best coverage for your monthly premium. By doing so, does one of your plans stand out? It really comes down to which plan gives the both of you the most bang for your buck, or, premium in this case. If your plans are roughly the same, it might make more sense to just keep your own employer-sponsored plan rather than enrolling in your spouse’s.
  • Create a spreadsheet. Don't underestimate the power of comparing all the options, costs and benefits to your expected life events and needs for the next calendar year in a spreadsheet or list. For example, if you're expecting a baby, what associated costs can you anticipate and what benefits offered can help you pay for those costs?
  • Don't forget about out-of-pocket costs. Before an insurance provider covers costs, what are the upfront fees, deductible amounts and co-pays that you would have to cover out-of-pocket? Some insurance plans will charge you a spousal fee to add your spouse to the account, so beware. 
  • Prioritize tax-advantaged accounts and don't forget employer contributions. Participate in tax-advantaged accounts like a Health Savings Account if you qualify or a dependent care FSA if your employer offers one. And if one of your employers contributes into one or more of these accounts, that may help you both better devise a strategy for 2022. If you need a refresher on FSAs vs. HSAs, here's our related lesson on the topic:

📊 CORPORATE CORNER

Today's Movers & Shakers

  • Zoom (-18%) after the video-chat company warned investors of a revenue slowdown; the street cut their price targets on the stock
  • Best Buy (-15%) despite beating on profits and revenues; holiday sales are expected to be below Wall Street's forecasts as they face possible product shortages
  • Urban Outfitters (-12%) as the apparel company beat on revenue estimates; costs to support increasing online sales is costly
  • Dollar Tree (+6%) beat on revenues and matched on profits; freight costs were higher than expected in the last quarter though
  • Agilent Technologies (-6%) showed strong numbers within their diagnostics and genomic unit; revenues were in line with expectations
  • JM Smucker (+5%) as the food producer beat on revenues and profits; there's continued strong demand for some of their key brands such as Milk Bone and Folgers
  • Xpeng (+7%) as the China-based EV maker reported a strong outlook for the current quarter despite lower than expected earnings
  • Abercrombie & Fitch (-16%) beat on profits and revenues but gross profit margins declined due to higher average unit costs stemming from supply chain issues

This commentary is as of 9:02 am EDT.

🌊 TRENDING ON FINNY & BEYOND

  • Answer: 0.65% APY is the best rate on a 1-year CD (certificates of deposit) you can get this month, according to Bankrate.com
  • Employees are paying an average of $5,969 annually for family insurance coverage (Dermatology Times)
  • 📢 Calling all personal finance writers, creators & financial advisors: Would you or someone you know be interested in writing Bites on finance topics (fully attributed to you)? If so, we want to hear from you! Contact us.
  • Finny lesson of the day: As we approach year-end and you're evaluating which positions to hold or sell, please refresh yourself on the topic of capital gains and losses in this bite-sized quiz:

Finny is a personal finance education start-up on a mission to make your money work for you. We offer a personalized learning experience through bite-size, jargon-free lessons, money trends & insights and investing tools.

The Gist is Finny's twice a week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. Finny does not offer investment and stock advice. The editorial team: Chihee KimAustin Payne.

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Calling all personal finance creators and writers

Would you be interested in writing Finny Bites, fully attributed to you? If so, we want to hear from you: send us an email and we'll be in touch!