Savings Bonds For Education - Should you buy savings bonds for college?US Treasury Savings Bonds are some of the safest investment options for saving money.  The U. S. Treasury stands behind U.S. treasury savings bonds and this is why they are such a sound investment.  However, safety cannot be our only consideration when comparing investment vehicles.  We must also evaluate how the return on investment compares with other financial instruments, like high interest rate savings accounts.

US Savings bonds come in two flavors.  They are the Seires EE bond and the I seires savings bond.  Savings bonds accrue value over time.  You purchase savings bonds in denominations of $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000.  After you purchase them, the savings bond values go up over time.  With Series EE Savings Bonds they will double in value over their savings bond maturity.  This means that if you buy a EE Savings Bond for $100 it will double in value if you hold it until the savings bond maturity date.  Therefore the savings bond redemption values will be $200 at the bonds maturity date.

Why should you consider buying a US savings bond for education :

One of the biggest benefits of US savings bonds is that if you use the proceeds of the bonds to pay for college tuition, you can be eligble for a tax exemption for US Federal income taxes.  If you don’t use the redeemed savings bonds to pay for college tuition, they are still favorable tax saving vehicles because you don’t pay taxes until you redeem the savings bonds.

It is important for you to read up on these eligibility criteria for using savings bonds for college.  You can only use the savings bonds to pay for tuition, not room and board and other expenses.  Additionally, you need to make sure that the you go to an eligible college, university or vocational school.  Not all colleges are eligible.  Another important thing to consider is your income.  If you make so much money, you will only get a partial tax exemption.  This can make a huge difference in the ROI of the savings bonds.

I hope that this article on using savings bond for education was informative.  Here at Smart Savings 101 we will continue to explore U. S. treasury bonds and other higher interest rate savings accounts.