“Should I buy government bonds instead of keeping my money in the bank?”
You’ve been hearing about government bonds more often lately, so it’s natural to be curious.
NISA and investment trusts are scary because their values fluctuate.
But leaving money in a savings account feels like a bit of a waste.
Individual government bonds are one option, but
it is important to be cautious about simply assuming they are safe because the government issues them, or that they are a good deal because the interest rates are higher than savings accounts.
You need to be careful about making such quick judgments.
To begin with, what kind of product are government bonds?
Government bonds are debt securities issued by the government to raise funds.
Purchasing them means you are lending money to the government.
There are three types of government bonds for individuals.
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Floating 10-year: Interest rates are reviewed every six months
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Fixed 5-year: The interest rate at the time of purchase remains for 5 years
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Fixed 3-year: The interest rate at the time of purchase remains for 3 years
They can be purchased starting from 10,000 yen, and the face value is returned upon maturity.
There are also risks associated with government bonds that you should know about
Individual government bonds are structured so that you will not lose your principal if you hold them until maturity.
However, that does not mean they are completely risk-free.
First, there is the government’s credit risk.
If the government’s financial situation becomes severe, it could affect the payment of principal and interest.
Next, there is the risk of inflation.
For example, even if you earn 2% interest per year,
if prices rise by more than that, the real value of your money will decrease.
Also, as a general rule, you cannot redeem them early for one year after issuance.
After one year has passed, you can redeem them, but an amount equivalent to the last two interest payments will be deducted.
Furthermore, in the case of fixed interest rates, even if interest rates rise after purchase,
the contracted interest rate does not change.
In a rising interest rate environment, people who purchase later may receive higher interest rates.
Which is better, savings or government bonds?
A major advantage of bank deposits is that you can use them immediately when needed.
Interest-bearing savings accounts and time deposits are protected by the deposit insurance system up to 10 million yen in principal per person per financial institution, plus interest.
Individual government bonds are not covered by deposit insurance.
They are products backed by the creditworthiness of the government that issues them.
Instead of just comparing interest rates,
you need to consider ease of use and redemption conditions as well.
When do you plan to use that money?
What is important is not whether you buy government bonds, but
when you plan to use that money.
There is no need to put money you will need for living expenses in the near future or for emergency spending into government bonds.
Is it money you won’t need for several years, or
is it money you want to save for future living expenses?
From your 50s onwards, it is important not only to grow your money, but
also to keep it in a state where you can use it when needed.
Instead of simply thinking “government bonds are safe” or “better than savings,”
think about whether they are suitable for how you intend to use your money.
About money and your future life.
Sometimes you cannot find the answer when thinking about it alone.
To enjoy the second half of your life in your own way without sacrificing what you want to do because of money.
I will continue to share useful information about money for your daily life.
[For those in Wakayama] Notice of Free Individual Consultation Session
For two days on Saturday, November 21st and Sunday, November 22nd,
we will hold a “Free Individual Consultation on Life and Money” at the Kintetsu Department Store Wakayama branch.
Why not consult a financial planner about money matters you are concerned about, such as household budget management, insurance, NISA, or inheritance?
Those who “just want to hear about it first” or “want to check their current household budget” are also very welcome.
Please feel free to use this service.
