Forbes - Make the most out of your tax refund

Your Weekly Advisor Update

A Note From Natalie:

Tax refunds are already rolling in for early-bird filers, but sticking that extra cash in a savings account will yield a paltry return. The current national average APY on savings accounts is a measly 0.37%, according to the FDIC.

If you want a safe way to invest the extra cash with a higher return, you may want to peek at the savings darling du jour: Series I savings bonds, aka I bonds—which are paying a 6.89% annual interest rate. And if you use your tax return to buy them, you can purchase even more, according to government rules. We have everything you need to know about buying I bonds in this week’s newsletter.

The downside is that to access the full interest rate potential of I bonds, your money will be tied up for up to five years. High-yield savings accounts fall somewhere between the two—while they don’t offer the yields current I bonds do, the interest rates are higher than average savings accounts and you can access your money at any time.

Paying off credit card debt is another wise way to spend that refund. The Federal Reserve raised interest rates another quarter point last week, which means credit card interest rates will also rise. Instead of sinking more money into old debt, pay off your credit card bill and shield yourself from rising interest.

I hope everyone has a great week. If you have comments or questions, reply directly to this email and let me know. I’d love to hear from you.

Very best,

Natalie

Natalie Campisi

Senior Staff Writer

Consumer Finance

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

How To Buy I Bonds With Your Tax Refund

The best part of tax season is when your refund check comes in. But with a little advance planning, the secure and mighty I bond may be an even smarter way to deposit what Uncle Sam owes you.

I bonds are designed to help offset the money-eroding power of inflation because the interest rate adjusts with inflation. There’s a $10,000 per year purchase limit on I bonds, but that increases to $15,000 when you use your tax refund to buy them.

There are two ways to buy I bonds with your tax returns: electronically and by mail. But don’t forget: You must file Form 8888 with your tax return to buy I bonds. If you want to lock in the current I bonds rate, submit your return as early as possible because the Treasury must get your payment by the end of April to lock in the current rate.

Mortgage Rates Dip As Economists Predict Home Prices Could Soon Follow

Mortgage rates significantly jumped in the spring partly due to rising inflation, but have more recently been driven down. That’s partly because The Federal Reserve took repeated action to rein in inflation in an attempt to address economic concerns, though some economists fear such actions could become too aggressive and inadvertently tank the economy.

Here’s what else you should know
this week:

Emergency Tax Relief Will Help Millions Of Californians This Year

While some folks have filed their taxes early, many may be preoccupied with the unending stream of winter storms in the Golden State. Both the state and federal governments are helping millions of Californians by extending tax relief this season, including automatically pushing back the filing date to October 16.

Are Your Deposits At Risk In A Banking Crisis? Congress Will Weigh In

The recent failure of Silicon Valley Bank sounded the alarm for bankers and the federal government, raising the question: Is your money safe in the hands of a bank? Congress is entering the conversation, too, and this is what they want Americans to know.

Fed Eases Tone On Rate Hikes As Aftershocks From Bank Failures Spell Credit Tightening 

The Federal Reserve may be retreating on their bullish rate hikes amid a banking crisis and a possible recession. We break down what last week’s rate hike signified in light of the current economic situation.

Best Travel Credit Cards Of  2023

It’s easier than you think to leverage your credit card rewards to snag award flights and upgrades. Be sure to pay off your balance in full to avoid hefty interest charges that will erase your potential savings.

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