The 10th anniversary of the fall of the House of Lehman, which helped transform a recession into the Great Recession, is approaching.

Thanks to the long economic expansion, those days are fading in the rearview mirror. Nevertheless, a recent report from the Federal Reserve Bank of Minneapolis highlights that far from everyone has financially healed. Specifically, the average household in the bottom 50 percent has about half as much wealth in 2016 as in 2007. 

No one knows when the next recession will hit or how bad the downturn will be when it arrives. Prudence calls for taking advantage of the good times to shore up household finances. Classic risk-reduction moves include cutting down on debt and increasing savings. Another margin-of-safety strategy is developing an entrepreneurial side hustle in case you lose your job or suffer a cut in pay.

You also might want to consider putting some money into what is probably the least-appreciated high-quality investment in the United States: savings bonds. Specifically, I-bonds. I-bonds are savings bonds designed to protect your savings from the ravages of inflation.

I know. The phrase “savings bonds” is reminiscent of eight-track tapes and rotary telephones. Your grandparents bought savings bonds. Wall Street mostly ignores I-bonds since there is no money to made from them.

Still, I-bonds have a lot to recommend as a safe place for stashing money. I-bonds are purchased online from the U.S. Treasury. The calendar-year limit with the I-bond series is $10,000. No commission is charged buying and selling I-bonds. The savings bond compounds tax sheltered until redeemed. You pay taxes on the gain. There’s no credit risk with I-bonds.

What’s more, the I-bond offers a hedge against changes in the consumer price index.

“An investor in these bonds cannot lose any money or any purchasing power for up to 30 years, despite either inflation or deflation,” wrote Zvi Bodie, professor emeritus in finance at Boston University, for PBS NewsHour several years ago. (Deflation is a decline in the overall price level, the mirror image of inflation.)

The I-bond is what a former colleague used to call “a heck of a deal.” Of course, you won’t get rich with I-bonds. That’s not the point. I-bonds are a savvy way for ordinary savers to limit their downside financial risk. Diversification pays, and I-bonds should be considered part of a well-diversified household portfolio for good times and bad.

 

Chris Farrell is senior economics contributor, “Marketplace,” commentator, Minnesota Public Radio.