Saving for college with U.S. Savings Bonds

Tuesday, January 11th, 2005
Categorized as: Savings Bond college education deduction

I am interested in looking at Series EE Savings Bonds as a monthly investment for my young son who enters college in the fall of 2010. Is it a good choice to invest in these? Whose name should go on them? What would this investment look like on a monthly investment of $250 ($500 bond-face value) when they are redeemed in 2010?

Tom’s response

Because you’ll need your money in six years, a conservative, low-risk investment like Savings Bonds is a better choice than higher-risk investments that typically earn more over longer terms but could leave you with less money than you’ve invested in a term as short as six years.

To estimate the future value of your investment, just multiply your $250 times the number of months you’ll put money in. It’s six years to 2010, plus four years while your son is in college, times 12 months, times $250 = $30,000 or $7,500 a year.

Because of the interest you’ll actually have more than that, but the interest will primarily cover the inflation that occurs between now and then. In 2010 you’ll have a little over $18,000 in 2004 dollars.

If you think inflation and interest rates are going to go up in the next few years, Series I Savings Bonds might be a better investment than Series EE. But without a crystal ball to foretell the future, it’s impossible to say for sure.

One advantage of using Savings Bonds for a college fund is that you may be eligible for the Savings Bond education deduction, however, it has lots of fine print that prevents many people from claiming it. Click here complete information on the educational features of Savings Bonds. If you go this route, your name should be on the bonds.

In my book, I present an alternative way to use Savings Bonds to provide for a college education for your child. It minimizes taxes and has none of the limits of this deduction. In fact, your child doesn’t even have to go to college to take advantage of this method.

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FDIC Insured Certificates of Deposit can pay 1 or 2% more than savings bonds when held for a similar length of time. See top CD Rates Below:


On August 18th, 2008 Margo said:

I would like to buy bonds to save for my son’s college expenses in the future. Is it possible to make bonds payable to me and my husband with a beneficiary as my son and we would still be able to use the credit for college expenses in a future (given that we meet all the criteria) Or is there a better way to make sure the bonds are payable to?
I wanted to buy bonds recently, but my local bank told me that I can only have either a co-owner (no beneficiary) or beneficiary – no co-owner. Is this true? Why can’t specify both?

On August 19th, 2008 Tom Adams said:

Margo – you can’t specify both a co-owner and a beneficiary. The reason is “they’ve always done it that way.”

Savings Bonds allow only one or the other. Either your husband can be co-owner or your son can be beneficiary. Just don’t make your son a co-owner, because that would make the bond ineligible for the education deduction.

Tom Adams

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June 1, 2010

After six years, over 400 posts, 3,680 real comments, and over 90,000 spam comments (thank you, Akismet, for making managing a blog with comments possible), I am closing public comments on I will contine to update the main articles on this site, but not the comments.

Virtually every question about Savings Bonds has been asked and answered on this site multiple times. Use the search feature (see the box in the gray area near the top of this page) or the detailed menu on the lower part of the home page to find the information you're looking for. If you have a copy of Savings Bond Advisor, you can ask me a question here.

Tom Adams

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