A savings bond is a loan you make to the US government. You hand the Treasury some money, the Treasury adds interest to it every month, and years later you ask for the whole pile back. There is no market price to watch and nothing to sell to anyone. The bond is worth what the Treasury says it is worth, and the Treasury is the one that has to pay.

That makes it a strange animal next to the rest of your money. It is not a bank account, because you cannot touch it for a year. It is not an investment, because it cannot go down. It is closer to a savings account with a locked lid, backed by the Treasury rather than by a bank, in the way that a cashier’s check is backed by the issuing bank rather than by the person handing it to you.

The two kinds on sale, and what they pay

Only two series are sold today. TreasuryDirect publishes the current rate for both, and both rates apply to bonds issued May 1, 2026 to October 31, 2026.

Series I is the inflation one. Its composite rate right now is 4.26%, which includes a fixed rate of 0.90%. That composite rate holds for six months from your issue date and then resets.

Series EE is the fixed one. It pays 2.40%, and TreasuryDirect states that rate stays the same for at least the first 20 years of the bond’s 30-year life.

Both earn interest monthly and compound semiannually, meaning that every six months the Treasury applies the rate to a new principal value made up of the old principal plus the interest from the previous six months.

Where the 4.26% actually comes from

This is the part worth doing yourself rather than taking on trust, because the I bond headline rate is not a rate anyone chose. It is the output of a published formula, and TreasuryDirect shows its own working.

Two inputs go in. The fixed rate is 0.90%, set on May 1, 2026, and it never changes for the life of a bond issued in that window. The semiannual inflation rate is 1.67%, based on changes in the non-seasonally adjusted CPI-U.

The formula is fixed rate, plus twice the semiannual inflation rate, plus the two multiplied together. TreasuryDirect runs it as 0.0090 + 0.0334 + 0.0001503, which adds to 0.0425503, rounds to 0.0426, and prints as 4.26%.

Two things fall out of that. First, most of the 4.26% is inflation, not yield. If inflation cools in November, the composite drops and the fixed 0.90% is all that survives. Second, deflation cannot push you below zero. The Treasury states the composite stops at zero rather than going negative, which is a floor no money market account gives you.

The EE doubling guarantee is the entire product

Series EE looks weak at 2.40%. On its own it is. The reason anyone buys it is a separate promise sitting underneath the rate: TreasuryDirect guarantees that an EE bond you buy now will be worth double what you paid at 20 years, and says it will add money at the 20-year mark if the stated rate did not get there on its own.

So EE is not really a 2.40% product. It is a hold-for-exactly-20-years product with a floor built in, and the quoted rate only matters if you break it early. That makes it one of the few genuinely hands-off ways to park money for two decades, which is why it turns up in lists of income that arrives without any work attached.

The rules that catch people out

Four of them, all from the same TreasuryDirect pages.

You cannot cash it for 12 months. Not one day earlier, for either series.

Cash before five years and you lose the last three months of interest. TreasuryDirect’s own example: cash after 18 months and you keep the first 15 months of interest.

The annual limit is $10,000 per series, per Social Security Number. That is $10,000 in electronic EE bonds and another $10,000 in electronic I bonds in one calendar year, with bonds bought for a child or as gifts sitting outside that count. The minimum is $25, and you can buy any amount above that to the penny.

Paper is gone. As of January 1, 2025, I bonds are only available electronically, through a TreasuryDirect account. Older paper bonds still exist, including ones people bought at a bank or through payroll savings, which is the kind of deduction that would have shown up as a line on your pay stub at the time.

Savings bond or savings account? We checked both sides

Here is the comparison we actually ran, using the two live official numbers rather than a rate someone remembered.

On the Treasury side, the current I bond composite is 4.26%, holding for six months.

On the bank side, the FDIC publishes national deposit rates every third Monday. As of August 17, 2026, the national rate on savings was 0.38%, money market was 0.63%, and a 12-month CD was 1.71%. Those are averages weighted across every insured bank and credit union the FDIC has data for, so they describe the whole market, not the top of it. A named high-yield account such as Capital One’s sits well above the 0.38% average, which is exactly why the average is a floor to beat rather than a target.

That gives you a fair three-way read:

  • Against the average savings account, the I bond wins on rate and loses on access.
  • Against a good high-yield account, the gap narrows a lot, and the account keeps your money reachable on any given Tuesday.
  • Against a 12-month CD, the comparison is closest, because both lock your money. The honest question is which lock-up pays better, and current CD rates settle that far better than either label does. If you like the lock-up trade in principle, high-yield CD rates are the direct competitor to a Series I bond, not a savings account.

The structural point is that a savings bond and a savings account are not competing for the same dollar. One is for money you have decided not to touch. The other is for money you might.

The tax treatment is better than people expect

Savings bond interest is subject to federal income tax. It is not subject to state or local income tax, which quietly matters if you live somewhere with a high state rate, because a bank account gives you no such exemption.

You also control the timing. You can defer reporting the interest until the year you actually receive it, which is when you cash the bond or when it finishes its 30-year life, or you can report the earnings every year instead. Most people defer. If your bonds sit in TreasuryDirect, the 1099-INT shows up in your account by January 31 of the following year.

There is one more exit. If the money goes to qualified higher education expenses, you may not owe federal tax on the earnings at all. Restrictions apply, and the bonds have to be in an adult’s name rather than the child’s, so read the Treasury’s own conditions before building a plan on it.

Who should actually buy one

A savings bond makes sense for money with a date on it that is at least a year away, and ideally five, so the three-month penalty never comes up. It suits savers who want an inflation floor they do not have to manage, and it suits anyone who wants a slice of money kept deliberately awkward to reach.

It is a poor fit for an emergency fund, because a 12-month lock-up defeats the purpose, and a poor fit for anyone who would be annoyed watching the rate reset downward in November. It is also capped hard at $10,000 per series a year, so it cannot be the whole plan for a large balance.

The rest of the boring machinery of everyday money works the same way. Read the actual terms, check the actual current number on the issuer’s own page, and treat any rate you saw in an article older than six months as decoration.