US Savings Bonds EE

[savvy06]

Hi.
Our daughter just turned 3 and since birth we have been buying us savings bonds ee in her name with us the beneficiaries. Currently she has about 5K. We would like to continue buying the bonds but we're wondering if it's a good idea to continue to do so, or if we should invest them in something else besides the educational funds. The savings bonds are usually purchased from birthday and x-mas cash gifts. Any ideas or thoughts on this? Thanks.

[sweeps]

Savings bonds aren't a bad investment, but honestly they're not great either. Although they're ultra-safe, you're probably not getting as good of a return as you should be getting. Especially with your child so young.

Also keep in mind that the EE bonds can only be used for tuition and fees. So things like room & board and other college necessities would not be covered.

My recommendation would be to leave what you have in the EE bonds, and going forward contribute to a 529 plan. You should be able to get much better returns from the 529 investment, and the proceeds can be used for things like room & board. Many states offer a tax deduction when you contribute as well (in addition to the money growing tax-free).

[sweeps]

Clarification: You can still redeem the bond even if you don't use it for tuition; you just don't get the federal tax exemption.

[slimcustomer]

Whatever you decide, putting down $500 in one of these accounts isn't a bad idea - 10% apy Kids Savings Account

[savvy06]

Thank you both.