Should Both You and Your Spouse Invest in I Bonds?

These days, I bonds look like a pretty good investment.

Any time you invest money, whether it's the crypto you've purchased through an app or the stocks you've added to your brokerage account, you bear the risk of taking losses. In fact, there's generally no such thing as a risk-free investment. But the closest thing to it may be I bonds.

I bonds are government-backed securities whose interest rate is directly pegged to inflation. Generally, when you buy bonds issued by companies, you're given a fixed interest rate on your investment that will remain in effect until your bonds mature. But in that scenario, you run the risk of the issuing company falling on hard times and failing to keep up with its bond payments.

I bonds are backed by the U.S. government, which makes them more secure. And since the interest rate they pay is tied to inflation, during periods when living costs are high, I bonds can be a lucrative bet.

That's precisely the scenario we're in today. Many consumers have spent the past year and change racking up credit card debt and dipping into their savings to cope with inflation. That's not a good thing.

But what is a good thing is that you can snag a competitive interest rate on an I bond investment today. And if you're married, you may want to encourage your spouse to do the same.

How I bonds work

When you buy I bonds, you must hold them for a full year before selling, and there are penalties for selling before having held your bonds for five years. There's also a limit as to how much in I bonds you can buy in a given year, and it's $10,000. That limit, however, is per person, not per family. So if you have a spouse, you're each allowed to buy $10,000 worth of I bonds in a given year.

Meanwhile, right now, I bonds are paying 4.3% interest through October. From there, the rate on those bonds has the potential to change and drop, since inflation has been dipping. So if you're looking to buy I bonds, you may want to do so sooner rather than later.

Are I bonds a good investment for your family?

The upside of I bonds is getting to snag a nice return now for minimal risk. In fact, the biggest risk of I bonds is that they may not end up paying a lot of interest down the line. But remember, once you've held those bonds for five years, you can cash them in without penalty, so that's something to consider.

If you and your spouse have the money to invest in I bonds this year, doing so could be a good bet -- but only if I bonds are one of several assets you own. Because you must hold these bonds for at least a full year, you should have other assets in your respective portfolios that give you more flexibility in case you need cash in a pinch or want money for another investing opportunity. Stocks, for example, can be bought or sold at any time.

You'll also need to consider whether I bonds are likely to lend to your long-term financial goals. The rate I bonds pay in the future is likely to drop from where it is today. That rate might still end up being competitive, but you might generate a higher return by purchasing shares of different stocks instead and holding them for many years.

All told, this is the sort of conversation to have with a financial advisor, if there's one you work with. If not, sit down with your spouse, read up on I bonds, and review your options jointly. If you put your heads together, you're likely to come to the right decision.