There is absolutely no doubt in the safety of certain types of bonds. This safety is not present in any other form of investment. But with this type of safety, comes much lower returns. If this is what you can accept, saving for college with Savings bonds is the right vehicle for you.
Savings bonds come with the backing of solid standing Uncle Sam. When he borrows, he pays back. He can't afford much for this guarantee of safety, but he can give you a tax break on any of the interest money from these bonds that is used for college.
These types of bonds break down into two categories: Series EE and Series I
Series EE bonds have an interest rate that changes every six months along with the US Treasury. Interest accumulates until redeemed, and if used for college, is tax free.
Series I bonds is a combination fixed rate, which is set at purchase, and variable rate, which follows the interest rate calculation of the series EE. The new bond on the block is also tax free when you use the interest earner for higher education.
Eligibility however is another matter altogether. the tax break phases out between $54,100 and $69,100 for single tax payers and for the married folks, the tax exemption starts to disappear when you income gets into the $81,100 to $101,100 bracket. You have to by the bonds after 1990, and, this is a big and, Grandma and Grandpa are excluded for the tax exemption. Either you , your spouse, or your dependent has to use the money to get the break.
Buy in denominations of $50,$75, $100, $200, $500, $1,000, $5,000, and $10,000. There is also the Easy Saver program that allows you to deduct the purchase automatically from your bank.
Buy bonds two ways: Download the form, and mail it from here or buy them online here
