Can you explain US savings bonds to me?

[Anonymous]

My ILs have been giving them to my kids since they were born for birthdays and Christmas. Each child now has at least $10K in bonds sitting in a safe deposit box. Should we just hold them and cash in when they go to college (still a few years out)? Or would we do better to cash them in and reinvest in something else (don't know if anything else is as safe, or more tax advantageous, for example)? ILs are very set in their ways and cannot be persuaded to set up any tax-deferred accounts for the kids on their own. TIA.

[Anonymous]

I'm holding on to ours. I thought my MIL was a bit crazy for such a bad investment, but when the market crashed and my son's college fund plummetted - those Savings Bonds suddenly seemed like a great investment.

[Anonymous]

What is the year they will mature? If you cash them in early, they are not $10,000. They are significantly less.

[Anonymous]

Are they EE bonds or I bonds? PP is right that EE paper bonds are bought for half of their face value, and gradually accrue interest to reach their face value. I think it's a good idea to have a little money in savings bonds -- they are safe, and have tax advantages (esp. for college).

[Anonymous]

Thanks, all for the info. I think they're EE bonds (can't remember; they're in the sd box already!), so I guess I'll hold onto them.

[Anonymous]

I found out the hard way that if the savings bond giver doesn't spell your DC's name properly then the banks won't honor them. My uncle gave them for years and then he died. I, too, had no idea what to do with them but when I finally got around to taking them to the bank they said they couldn't do anything with them because the name was misspelled. They told me that my uncle would have to reissue in the correct name but unfortunately he isn't around to do this. Any advice banking types?

[Anonymous]

bump anyone anyone else?

[Anonymous]

My college account was wiped out when I was a teenager (long story...), and my mom managed to put me through school with savings bonds she'd purchased throughout the years. Of course this was back when college costs were more reasonable, but we're both grateful she had them handy. I'm sure a financial planner will tell you they're a waste, but personally I think they're a good safe investment to have in your children's portfolios.

And I'm not 100% sure, but I think if you are in a certain tax bracket, you do not have to claim savings bonds when cashed if they are used for educational expenses.