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Savings-Bonds-Alert: Savings Bonds for a 14-year-old

Thursday, September 16, 2004

Savings Bonds for a 14-year-old

I have a granddaughter who will be 14 next month. I have been purchasing EE bonds for her birthday and holidays for a college fund (in addition, of course, to enjoyable items for her). I am now wondering whether I should continue the EE bonds for use in her college fund which will begin four years from now, and what interest would she be receiving if it were to be cashed in while she is in college. Tom's response It's impossible to say exactly what the rate will be in four years because the Savings Bond interest rate changes every six months based on market interest rates. For the current six-month rate period, the EE bond rate is 2.84%. You also have to consider there's a penalty of the last three months worth of interest if the Savings Bonds are redeemed before five years. On the other hand, currently you can pay the penalty and still receive more than you would with a 1- or 2-year bank certificate of deposit. I think you'd be interested in this link, which has a sample situation involving saving for college with Savings Bonds.


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