I have $3,000 worth of Series EE & I bonds for my 18 mo. old twins. Should I sell them & put the $ in a 529?

Answer 1

While your $3000 is safe and secure, these types of bonds pay very little interest. Question is....can you get a better return over the next 18-20 years? Yes you can. And your choice depends on your tolerance for risk.

To start, go to your local bank and look at CD's or money market accounts. Some pay higher rates. There are accounts with online banks now like hsbcdirect.com & emigrantdirect.com and because they don't have the overhead of traditional banks they are paying around 5%. Plus you can transfer money in and out from your regular bank account online at any time.

Next, research your states 529 plan. They are getting better overall. Main issues with 529 plans is their returns have been lackluster compared to other investment vehicles and are to be used only for the kids college education. Penalties can apply if your kids don't go to college. What if Junior grads from high school and wants to go to a trade school instead of college? What if Junior wants to start a business instead of going to college? What if Junior needs a car to get a job? Catch my drift. I have 4 kids. Two went to college. Two didn't. I didn't have 529 plans to pick from when they were born, so I saved and invested money here and there so when the time came, I could help them regardless of choice.

Alternatives to 529, look at investing in solid and stable mutual funds that have a long term (10 years or so) track record of making above average returns....and fund managers who are considered all stars. Here are a few to begin with for examples:
Excelsior Value...symbol UMBIX
Cambiar Opportunity...symbol CAMOX
FBR Small Cap....symbol FBRVX
Research these and other funds at morningstar.com or finance.yahoo.com. Both good sources of info. Gains made will be taxable, but since returns are better, you come out ahead and you will have a chunk of money to help whenever the time comes. Since they invest in the stock market, some years down and some years up, but overall average is stellar.

Do your homework. Pick the best options for you. Review your choices at least twice a year, keep adding $ as often as you can and things will be okay. Good luck with those twins!

Answer 2

If it's for college I would start them an IRA with a small group of aggressive mutual funds. 529 is not bad but usually you can't pick the best funds to get the most growth. That will turn your $3000 into at least 16000 by the time they are ready for college. Good Job thinking ahead.

Answer 3

I'm not sure what a 529 is, but almost anything is beter than a EE bond. If they are not mature, hold them until maturity, but not a day longer. They gain so slowly, they aren't worth it.

Answer 4

Fred, I would put half the money in the 529 and the other half in the 428. Hope this helps.

Answer 5

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