How To Save For A Child's Education

Saving Bonds

There’s a program called the Education Bond Program that allows the interest on savings bonds in specific categories tax-free. This only works if they are cashed out and used to pay for a college education, but it’s something many parents and grandparents use when they want to invest in a college education for their kids and grandkids. Many individuals use these bonds because they’re guaranteed due to the backing of the United States government. They don’t lose value, so the person using the bond can keep the value plus any interest it accrues over the years. These bonds are also tax-free if they are rolled into a 529 plan at some point. Anyone who wants to take advantage of a tax-free bond for their higher education expense must be at least twenty-four years old the date it’s issued, and it must be in the name of a parent if the bond is issued before the child turns twenty-four. Children are listed as beneficiaries, though it’s possible for an adult to use a bond in their own name to pay their own education expenses.

Continue reading to learn about UGMA and UTMA accounts.