From the first flutter we feel inside to the first time we hold our children in our arms, we realize that we are responsible for a life other than our own. We want to make the best decisions we can and ensure that our child’s needs are provided for. But what if something happens to us? What would happen to them? While life insurance can provide some security that our children will be provided for, by starting a child’s savings account or purchase bonds in their name we can secure their financial future.

In the beginning, we will be the ones who will add money to our children’s accounts for the purpose of offsetting the increasing costs of college tuition or private education. Unlike college savings plans, a children savings account offer the flexibility of accessing money when your child needs it most; whether that is before they are of college-age or after. The money that has been invested in a children savings account will be available to the child immediately without penalty.

A number of financial institutions offer a children savings account, so search for the best rates possible with the fewest restrictions. Many banks have a children savings account that offers no minimum age, but require that an adult take trust of the money until the child reaches a certain age, usually 18 years of age.

Bonds are another option for brightening your child’s financial future. Because bonds hold the initial monetary investment for a set amount of time before they mature, they may have a higher interest rate than the more flexible children savings account. However, in order for bond purchasing to be beneficial you have to be prepared to wait for the bonds to mature over a period of time, usually a minimum of three years and in most cases, much longer.

By opening a children savings account or purchasing bonds, we create a cash flow cushion available when our children may need it as well as the peace of mind of knowing that the small investments we make over time will give to our children in more ways than we imagined.

Whenever you are doing a research on one subject, try to get to the essence of what you are studying. It is true of mundane areas as well. As you search for information about savings accounts try and reach the best value, definitions and clarity. Read what we have on our site on savings accounts and if you need more material on this you can always go to the world wide web again to finish up on your studies. In this information age, there is a lot of options for increasing your knowledge base. Check the links below for more information on savings accounts and other related information.



Thanks to Charley Hwang for contributing this article to our Bonds blog:

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Savings bonds are a type of Treasury security that earns interest for up to 30 years. They are only payable to the person to whom they are registered and can not be resold. You can cash them in after one year, but if you redeem it before five years you will pay a three month interest penalty.

There are two types of savings bonds issued by the government: the I-bond and the Series EE Patriot Bond. The I-bond is a savings bond that is inflation-indexed. Every May and November, the Treasury Department adjusts the inflation premium. The fixed rate of the bond that you purchased is fixed for the full term of the bond. The inflation premium is adjusted so that you do not lose the purchase power of your investment over time.

For example, you buy an I-bond in December. Your fixed rate was set in November and is your permanent rate. For six months, you will receive the inflation premium that was set in November. In June, you inflation premium is adjusted to whatever rate the Treasury establishes in May. Your fixed rate is not changed.

Each month your I-bond increases in value, and interest is compounded semiannually. The interest is compounded and paid at maturity. You can report the interest each year as it is accrued, or you can defer the payment of federal taxes until the bond is cashed. You decide when you pay the tax.

I-bonds that are used to pay for college tuition and fees are 100% exempt from federal taxes. The bond owner must pay for the higher education expenses at an eligible institution within the same year as the bonds are cashed.

Many financial institutions, including online institutions, will sell and redeem I-bonds. You may be able to purchase them through your employer’s payroll savings plan. You can purchase them through financial institutions in eight denominations: $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000. If you buy them online through TreasuryDirect, a $25 denomination is also available.

You can purchase up to $30,000 in paper I-bonds each year. You can also purchase $30,000 in electric I-bonds in addition to your paper bonds.



Thanks to Martin Lukac for contributing this article to our Bonds blog:

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