United States Treasury Building in Washington DC


US Savings Bonds are traditionally secure and dependable investments. They offer great opportunities to save money while supporting the federal government’s funding needs. However, it’s important to understand how inflation and rising interest rates affect US Savings Bonds. This Article discusses inflation, interest, and savings bonds, and why some banks reject paper savings bonds.

The Relationship of Inflation, Interest, and Savings Bonds

Inflation signifies a general price surge, leading to a decrease in money’s purchasing power. This devaluation affects your savings’ purchasing power, and US Savings Bonds, particularly Series EE and Series I Bonds, respond differently to inflation and interest rate fluctuations.

Higher interest rates are often a strategy to counteract inflation, implemented by the Federal Reserve—the US central banking system. By increasing interest rates, borrowing becomes more expensive, reducing spending and, subsequently, inflation. However, this scenario can also influence the returns on US Savings Bonds.

Series EE Bonds: These bonds are bought at half their face value and mature over 20 years to their full-face value. The interest rate of Series EE Bonds is fixed for the bond’s lifespan. Purchasing a Series EE Bond during a period of low interest rates sticks you with bonds paying low interest rates even if the rates increase later, making it less appealing than other high-return investments.

Series I Bonds: Crafted to provide inflation protection, Series I Bonds have a fixed interest rate and a variable rate adjusted semi-annually based on inflation. As inflation escalates, so does the interest rate on Series I Bonds, enhancing their appeal as an investment during high-inflation periods.

Understanding Series EE and Series I US Savings Bonds

Series EE and Series I Bonds are both low-risk investments guaranteed by the US government, but they possess distinct differences crucial for investors to consider.

Series EE Bonds guarantee a doubling of their value after 20 years, equating to a minimum interest rate of 3.5%. However, if the fixed rate at purchase time increases, investors receive that higher rate. Series EE Bonds are an excellent choice for long-term savings, provided interest rates remain stable. Conversely, a low-interest Series EE Bond loses its appeal if interest rates rise.

In contrast, Series I Bonds offer a safeguard against inflation, combining a fixed rate with an inflation-adjusted rate for potentially higher returns during inflationary periods. They are best for investors aiming to maintain their purchasing power.

Why Many US Banks No Longer Cash Savings Bonds

Historically, redeeming US Savings Bonds was a straightforward process at local banks. However, numerous banks have recently discontinued this service, citing fraud concerns and the labor-intensive nature of handling bonds. As explained by Rob Copeland from The New York Times in an American Public Media “Marketplace” podcast interview,[1] the complexity and delays in the government’s bond cashing process and the manual effort required by banks have made the service impractical for many banks.

This shift underscores the importance of managing your savings bonds through TreasuryDirect, providing convenience and necessity in the modern financial landscape. While redeeming paper bonds via mail remains an option, the online process is much faster and more efficient.

Converting Paper Bonds to Digital Bonds

The US Treasury has transitioned to issuing electronic savings bonds, phasing out paper bonds. Nevertheless, many individuals still possess paper bonds. Converting your paper bonds to digital format through the TreasuryDirect program enhances investment management and ensures investment security. A paper-to-digital savings bond conversion also avoids the problem of cashing paper bonds.[2] So, we recommend converting paper bonds to digital bonds as soon as possible.


Grasping how inflation and rising interest rates influence US Savings Bonds is vital for informed investment decisions. Series EE and Series I Bonds present varied benefits and risks, with the appropriate choice depending on your financial objectives and the prevailing economic conditions. Transitioning from paper to digital bonds ensures secure and efficient investment management, aligning with the ongoing shift toward digital transactions.

Navigating these uncertain economic times requires knowledge and awareness of your investment choices, ensuring you are well-equipped to make sound decisions for your financial future. By staying informed and proactive, you can optimize your investment strategy and navigate the complexities of inflation, interest rates, and US Savings Bonds with confidence.


Find more information about this and other topics at www.hawkinselderlaw.com. You can also call us at 812-268-8777.


Jeff and Jennifer are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers, and active members of the Indiana State Bar Association and the Indiana Chapter of the National Academy of Elder Law Attorneys (NAELA). Jeff is also a member of the Illinois NAELA Chapter, a Fellow of the American College of Trust and Estate Counsel, and a member of the Illinois State Bar Association.

Both Hawkins are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois.

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[1] (https://www.marketplace.org/2023/10/12/got-old-savings-bonds-lying-around-good-luck-cashing-them/)

[2] For a comprehensive guide on converting paper bonds to digital, visit our detailed article https://www.hawkinselderlaw.com/convert-to-digital-savings-bonds.