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Savings bonds

July 19th, 2005 at 03:34 am

walked with mom for 55 min

While my sister and BIL make a lot of money they are the type of people who will always spend more than they make, so my parents and I knew they would have very little, if any, money saved for my nieces college. I feel that college is a necessity for the majority of kids these days. So my parents and I started saving money for their colleges when they were very little.

I decided to save $10,000.00 each (I have 2) and made that goal a couple years ago. All of the money is currently in stock index funds. My oldest niece is 14 so there's only 4 more years till she goes to college so I put $5000.00 of her college money into I-Bonds today. Currently they are paying 4.8%.

The reasons I decided on I-Bonds are:

1. The money is only locked up for one year after that I can get to it whenever I want with a 3-month interest penalty if it's before 5 years. After 5 years there are no interest penalties.
2. The interest rate is competitive with CDs. Compare 1 year CD with 1 year bond
3. I don't have to pay taxes on the interest until I cash the bonds in
4. I never have to pay state taxes on the bonds
5. It's very secure I don't have to worry about the value suddenly tanking right when I need it for my nieces college costs.
6. If inflation rates goes up, my interest rates will go up also.
7. I used Treasury Direct and I didn't have to pay anything to buy the bonds.

Over the next few years I plan to gradually move all of their college money into I-bonds.

3 Responses to “Savings bonds”

  1. Anonymous Says:

    Missed the best part about I-bonds for you - if they are used for education, you don't pay federal taxes on the interest either. Like you I think they are great - much more flexible than a 529 account. In case you don't know about this site, here's a good reference:

    FYI - if you are using bonds for education, buy a mix of denominations. That way you can make change & redeem only what you need.

  2. Anonymous Says:

    That is really sweet of you. My parents didn't save much of anything for my college, either, so I hope your neices appreciate what you've done!

  3. Anonymous Says:

    I think that's great! What a wonderful, generous thing you're doing. To help out someone else (2 people actually) while also trying to achieve your own goal of retiring at 50 is really inspiring. Is this a surprise for them?

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