Oil prices are at record levels. Gas prices are moving up. The real-estate market continues to stumble. And who knows how bad the mortgage mess will get.

Amid the uncertainty, where should you invest your money? Consider U.S. Savings Bonds.

And right now, your best bet is a particular type of savings bond called the Series I bond. Why? Consider these points:

•The interest rate that a Series I bond earns changes every six months, with inflation. So if the inflation rate goes up — as it usually does — the interest rate on your Series I bond will go up, too. Thus, Series I bonds help protect the purchasing power of your dollars. In other words, they help protect you against the ravages of inflation.

•If you buy a Series I bond from now through April, it’ll earn interest at an annualized rate of 4.28 percent. That’s the new I-bond rate that the U.S. Treasury set on Thursday. It’s up from the 3.74-percent rate that the Treasury set in May.

•If you already own Series I bonds, stick with them. Some are now earning as much as 6.71 percent, said Tom Weishaar, author of Savings Bond Advisor.

“People need to realize there is great turmoil in the investing markets” right now, Weishaar said in a telephone interview last week.

It’s at times like these that many investors send some of their dollars on a flight to quality, a flight to safety. They seek refuge from uncertainty, a place to stash cash until the storms abate. So they look to blue-chip stocks, U.S. Treasury securities and other such places.

“In a flight to safety, savings bonds are one of the safest investments there is,” said Weishaar, who also runs a Web site about savings bonds:

www.savings-bond-advisor.com

One reason is that savings bonds are backed by the full faith and credit of the U.S. government. So you’re pretty much assured that you’ll receive the full amount you’re owed — principal plus interest — when you cash in your bond.

There are other benefits, too. For example, Series I bonds don’t pay out interest. Instead, interest accumulates over time. When you cash in the bond, you get back your original investment, plus all that accumulated interest.

True, the interest is subject to federal income tax. But nearly all bondholders get to postpone the day of reckoning — you don’t have to pay the tax until you cash in the bond. As a result, you can defer the tax bill — for up to 30 years if you like. In a sense, the Series I bond is a tax shelter for the little guy.

In addition, the interest you receive escapes state and local income tax altogether.

Series I bonds are widely available at most banks and credit unions. Another way to buy them is online, directly from the Treasury, at this Web site:

www.treasurydirect.gov

You can invest as little as $25 if you buy online, or as little as $50 if you buy through a bank or credit union. Thus, Series I bonds can be attractive no matter the size of your pocketbook.

So Series I bonds can be a pretty good deal, something to think about the next time you’re trying to figure out where to stash some of your money.

A few other points to keep in mind:

•To discourage people from frequently cashing in and out of savings bonds, the government has a number of rules. For example, you generally must hold a bond for at least 12 months before you can cash it in. Also, if you cash it in within the first five years you own it, you’ll forfeit three months’ interest.

•Remember that the interest rate on Series I bonds has two components. One is a variable rate, which changes every six months with inflation; the other is a fixed rate of interest, which stays with your bond for its entire 30-year interest-earning life.

The current, annualized inflation rate on Series I bonds is 3.06 percent, up from the previous rate of 2.42 percent set in May. The current fixed rate is 1.2 percent, down from the previous rate of 1.3 percent set in May.

•All Series I bonds issued before November 2001 are earning, or will soon earn, interest at an annualized rate of at least 6 percent, Weishaar said. Those issued May 2000 through October 2000 are earning, or will soon earn, interest at an annualized rate of 6.71 percent, he said.

•New Series EE bonds aren’t as appealing as new Series I bonds, said Daniel J. Pederson, president of The Savings Bond Informer of Detroit, a savings bond consulting service, and author of Savings Bonds: When to Hold, When to Fold, and Everything In-Between.

The government on Thursday said that new Series EE bonds will earn interest at an annualized fixed rate of 3 percent. That’s down from the previous rate of 3.4 percent set in May.

As a result, the I-bond “is certainly the better buy,” Pederson said in a telephone interview last week. “The caveat here is, if inflation going forward is equal to or higher than what we’ve been experiencing, then the I-bond would be the better buy.”

•When shopping for safe places to stash your cash, don’t look just to savings bonds. Also consider such items as certificates of deposit and money market accounts.

At one point last week, the average yield on one-year CDs was 3.61 percent, according to BankRate.com, a publisher of interest rates. On five-year CDs, the average yield was 3.92 percent. Money market accounts were yielding about 3.54 percent.

Don’t forget that a number of local banks and credit unions often have yields that exceed those averages, so it can pay to shop around.

•There are lots of other details about savings bonds, too many to list here. For more information, call the bond program toll-free at 1-866-388-1776, or write: Bureau of the Public Debt, P.O. Box 7012, Parkersburg, W.Va. 26106. The Treasury’s bond program Web site isn’t as user-friendly as it used to be; savings bond information isn’t all in one easily accessible place. Still, the Web site is worth a look:

www.treasurydirect.gov

TODAY’S TIP: Planning to claim the tuition and fees deduction on your federal income-tax return early next year? You’ll need a new form to do it. In general, the deduction is for up to $4,000 of college tuition and fees. Until now, you claimed the deduction on the cover of your return. That’ll still be true for the filing season which starts in January. But you’ll also have to fill out and attach new Form 8917.

Why? You can’t claim the tuition-and-fees deduction and an education credit in the same year for the same student. The new form will provide the Internal Revenue Service with additional documentation, and will help ensure that taxpayers aren’t claiming both tax breaks for the same student in the same year, IRS spokeswoman Peggy Riley said.

Note to readers: MoneyLine’s usual question-and-answer format returns tomorrow.

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