Government I Bonds vs 529 Plans

Two of the more popular options for college savings are government I bonds and college 529 savings plans. When you want to provide a college education for your child, something must be done early on in order to save enough money to cover the bill. College is getting more and more expensive every year, and taking advantage of the options before you is important. Both government I bonds and 529 plans have their advantages. However, they both have a few drawbacks as well. Here are a few things that you will want to consider about both for your college savings needs.

Government I Bonds

Savings bonds have been a staple in the United States for many years. Many people from the older generation in America believe strongly in savings bonds and still invest in them today. With a savings bond, you are getting a government-backed security that is guaranteed to pay out at least a certain amount of money upon maturation. This can provide you with a lot of security in your investments when compared to other options. 

With the government I bond, you get not only a certain percentage of interest; you also get something added on each year for inflation. The government knows that $1 today buys more than $1 will tomorrow. Therefore, they start out with 1% interest and then add on the amount for inflation at the end of the year. This can provide you with a better rate of return than your normal savings bond. 

When you invest in government I bonds, you are not taking the flashy route. You are not going to make a huge return on your investment. However, you will not lose your investment either. When you are betting on a loved one's education, you may not want to leave that to chance.

529 Plans

529 college savings plans are another popular option to save for college. With the 529 plan, you make contributions to the fund, and then the money is allowed to grow tax free. As long as the money is used for college expenses, you will not have to pay any taxes or fees again. 

With the 529 plan, the account holder is in charge of the money. He or she can decide what to do with the money and can elect to change beneficiaries. You also do not have to use the funds by a certain date. If one child decides not to go to college, you can always change the beneficiary to another child. 

The 529 plan is going to depend on investments for its returns. There are no guaranteed returns with these forms of investment. You are taking your money and investing it into the market. This is very similar to a Roth IRA as you are putting money into an account after tax and then investing it in securities to grow. 

Government I bonds are going to be a safer bet, but you can potentially make a much bigger return with a 529 plan. Therefore, you need to weigh your options before choosing the right way to save for your children's education.

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