My kids are still young but I have a hard time saving. Do you think U.S. Savings Bonds are a good way to put money aside for them?

Asked by Meredith L

1 Answer

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Answered by Phillip Christenson, CFA in Plymouth, MN
US Savings Bonds pay very little interest in today's interest rate environment. In fact, I got this directly from the TreasuryDirect website (where these bonds are sold),

"The composite rate for I bonds issued from May 1, 2015, through October 31, 2015, is 0.00%. This rate applies for the first six months you own the bond."

Yep, you read that right, 0.00% interest. If you are looking for a safe alternative you could consider online savings accounts like Capitalone360.com which is paying 0.75% right now. If, however, you are setting this money aside for the long term you should consider investing the money in stocks. Stocks are still the best way to achieve long term growth of capital. Yes, there is risk that the money could go down but over the long term the market averages about 10% per year. This could be a fun way to get your children involved in money too - purchase a stock they are familiar with, like Disney!

You should also consider using a type of account specifically designed to help you save on taxes, like a Roth IRA, Coverdell Education Savings Account, or 529 plan.

Feel free to reach out to me personally or post a followup question if you want more info. The more details you can provide the better!

Thanks,
Phillip | 08.19.15 @ 13:49
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 13:58
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Answered by

Phillip Christenson
Phillip Christenson, CFA in Plymouth, MN