Should You Invest in Savings Bonds?

United States Savings Bonds can aptly add to your child's education savings. There are many other investment opportunities and many of them may promise higher rates but as recently seen in the market you have to be doubly careful when investing in anything let alone your child's future. Savings bonds offer diversification to you savings plan and tend to be safer than many of the other options.

Most education savings plans include a combination of stocks, mutual funds, certificates of deposit, education IRAs, as well as cash. The reasoning for this is that the more places you have the money spread out the higher your return should be. This diversified approach is one that most financial advisors recommend. Savings bonds can provide a reliable, steady-growth option with significant tax advantages if they are invested in correctly.

Savings bonds are considered a safe, secure investment because they are backed by the United States government, however with a growing national deficient there has been some debate on this front. It is important to sit down with a good financial advisor and talk about what investing in U.S. Savings Bonds means.

Another advantage to investing in savings bonds is that they are designed never to decrease in value. Unlike other investments, savings bonds appear to be a solid investment. The other advantage touted by many is that savings bonds also have tax advantages. Interest on savings bonds is always exempt from state and local income taxes and allows some or all interest to be excluded from federal income tax, this in an incentive for many as opposed to interest bearing savings accounts and other investments.

Income limitations such as age and other restrictions apply to the person claiming the tax exclusion and eligible education expenses that are considered are tuition and fees paid to colleges, universities and vocational. A parent who doesn't meet the income limits for this tax exclusion can and should consider buying savings bonds in the name of the child.

U.S. Savings Bonds can be a wonderful addition to your education fund for your child. For more information on how to invest in savings bonds and what is involved in making such an investment contact your local IRS office or seek out a skilled financial advisor.