Savings bonds vs ???

[Homerboy]

when my son was born ~ 6yrs ago he received a pile of US Savings Bonds totaling ~$1000.
Is it best to just keep the bonds or should they be cashed and invested in something else like a 529 etc?
Whats the greatest rate of return for him in the long run?

 

[hpkeeper]

how old is your son?

 

[krunchykrome]

Originally posted by: Homerboy
when my son was born ~ 6yrs ago he received a pile of US Savings Bonds totaling ~$1000.
Is it best to just keep the bonds or should they be cashed and invested in something else like a 529 etc?
Whats the greatest rate of return for him in the long run?

What type of bonds are they? I or EE?

Series I bonds were purchased at face value, so you'll receive that + any accrued interest. Series EE bonds are purchased at half of the face value.

 

[tfinch2]

Originally posted by: hpkeeper
how old is your son?

Way to read the OP

 

[DaWhim]

cash it and buy yourself something nice.

 

[woowoo]

Keep the bonds and continue to buy him more

 

[hpkeeper]

Originally posted by: tfinch2

Originally posted by: hpkeeper
how old is your son?

Way to read the OP

what are you? the mod that makes sure everyone reads everything correctly? what's your take on the problem? or was being meticulous your contribution? ...anyways...




Being that I'm at that point in my life where I have to cash my savings bonds... this is my take. I'm 23 and I'm finishing up my last year in college, I have a bunch of savings bonds, some of which haven't even matured yet... But I don't think i could have done it better... I'm even considering stuffing that money into a mutual fund at this point and have that kick around until I really need the money.

if you cashed the bond now, you wouldn't get the full value of it. So you'd have to figure out the interest rate per year on the amount you'd receive if you cashed the bond out right now and put it in some other form of savings between now and the time that your son needs it. I don't think that you're going to get much from the bond right now, I'd just wait until it matures and put it into another form of storage... at least wait for it to mature a little more.

 

[vi edit]

EE bonds have tax advantages for educational purposes. They typically have lower interest rates because you are buying at half the face value.

I bonds are nice in that they are inflation adjusted and have shorter holding periods. A bit more flexible purchasing options too. They also have tax exemptions for college expenses.

I'm not a *huge* fan of the Coverdells/529's. I just like the flexibility of the I-bonds. Put them in your own name and you can use them in emergencies, or you can use them to pay for your kid's tuition.

You are past the holding period for your EE's (5 years) so you can cash them & roll them without penalty. I bonds are paying a little better interest right now than the EE's.

 

[GasX]

Savings Bonds are a zero risk / low return investment with some minor tax advantages and some hassles when you try to cash them in.

My view is that your son is young enough that a higher risk investment is a better choice. Sell the bonds and put it all into QQQ.

 

[Homerboy]

EE bonds so they still have some maturation to do (hes approaching 6yrs)
I would never cash these bonds and us for myself/family expenses. They are his (hell I still owe him $250 cash actually).

It seems that I should sit on em until they are matured (obviously) and then, I could/should cash them out and roll them into something a little higher risk for (potentially) greater reward.

 

[JLGatsby]

Sell those crappy bonds and buy corporate bonds or stock.

Government bonds are for old ladies and the paranoid.

 

[imported_Imp]

Don't know how US bonds are, but Canadian government bonds are a joke. You can find GICs at higher rates (what I'm using). I'd start buying stocks, but too lazy and don't have the balls with no income right now.

 

[Homerboy]

Originally posted by: JLGatsby
Sell those crappy bonds and buy corporate bonds or stock.

Government bonds are for old ladies and the paranoid.

With you saying it... Ringing endorsement for me to keep the bonds.

 

[vi edit]

I guess I'm just old and paranoid. I'm not gung ho on buying stocks for college education. Index funds while diverse, are still subject to market risk. If the kid is 6, you've got about 10 years to build on before you want to roll it to something a little more liquid/low risk.

But I just think that you run too much of a risk of having a down slump of indexes for a several year period that eat away at appreciation. What happens if when you go to pull out funds and your account is down 20%? And continues to stay flat for a couple years?

It's not like retirement where you looking 20-40 years down the road with a payout over the course of another 10-30 years.

You have a fixed period of around 18 years with a defined payout of typically 4-5.

To me, the risk just isn't worth the reward. 6% guaranteed, or around 10%(average) with the chance that it could be down 20% when you need it?

For something like college funds, I'll stick to the set and forget nature of government bonds.

 

[MrMaster]

I definitely would cash them out. Even the I bonds were adjusted much lower recently. 2 yrs ago, hell yes but now....forget it.

Take the money and if you still want to be conservative..make CD's your absolute lowest risk vehicle. Government bonds just are not worth it.

 

[JS80]

buy stocks if you want your kid to not think you're an idiot in 20 years