Would you cash your savings bonds?? Was: Tell me about savings bonds - Page 2

[eclipse]

I've been wondering about this myself. Dh's grandparents send $100 in bonds per year per child and we just got this year's bonds in the mail. I guess I'll have to look into it.

[Rita C]

Savings Bonds

Go to your local bank where you would cash in the bonds. They can tell you how they work and what rates of interest you are earning. It changes frequently and it is never very much. Know that you will owe taxes on the interest you earned when you cash them in. Savings bonds are not a way to get a good rate of return. From what I recall they are somewhat equivalent to a 6 month CD. You would more then likely be better off putting the funds into a low minimum requirement mutual fund and leave it there for 20 years.

[GinaRae]

Originally Posted by rachelagain

I just looked up dc's bonds and it says they are gaining 4.11% interest-- which isn't bad. Because isn't inflation 3%?

Mine were also 4+ but because they're so SMALL they really weren't gaining much. I mean, after 20 years they were worth $70+ for a $50 bond. So after it had matured, it only put on $20 in a lot of years.

To make good money off 4% interest, you need that interest to be on several thousand dollars.

[CathMac]

Originally Posted by rachelagain

I just looked up dc's bonds and it says they are gaining 4.11% interest-- which isn't bad. Because isn't inflation 3%? ...

rachelagain,
Yes, they are beating inflation, but just barely. Ideally college saving should beat the inflation of higher education which is often in the double digits.

When DC is very young you have time to invest aggressively. I think the goal should be to keep pace with or beat the stock market. If you find a good "indexed" mutual fund and don't touch it then over time you should earn an average of 6 to 8 percent. As DC gets older you should preserve the principle and earnings by shifting into lower risk investments.

In that sense it's similar to investing for retirement, only with a shorter time horizon, unless you got off to a late start on retiring.
~Cath

[Thystle]

Maybe cash out and put into an ING account?