Education Planning Common Questions

Text Size: A A A

Are savings bonds a good way to save?

Answer:

Savings bonds may or may not be the best way for you to save. It depends in large part on your savings goals and needs. Savings bonds are backed by the full faith and credit of the U.S. government. As such, they are generally deemed very safe investments. In addition, savings bonds are readily available and can be exchanged at most banks. They are also available through payroll deduction plans and automatic purchase plans. Moreover, interest earned on savings bonds is exempt from state and local taxes. In some cases, interest income may also be exempt when the proceeds are used for educational expenses. In short, if you have low tolerance for risk and want a tax-advantaged savings vehicle that is both liquid and simple to administer, you should definitely consider savings bonds.

Savers who shun savings bonds argue that it is difficult to calculate the value of savings-bond interest rates. Multiple rate schedules, interest rates pegged to other government securities, and yet-to-be-determined rate structures make it difficult for most consumers to calculate how much they are earning on their investments and how much "savings" they have accumulated on any given date. Moreover, most savings bonds will not protect you from inflation (Series I bonds are the exception, with semiannual adjustments for inflation). Finally, your savings bonds cannot be sold or used as collateral for a loan.

Related Content - Saving For College

Common Questions

The Basics

529 Plans

GE 37707 (03/07)

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed and you should seek advice based on your particular circumstances from an independent advisor. AXA Equitable and its affiliates do not provide legal or tax advice.

Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Data and information is provided for informational purposes only, and is not intended for solicitation or trading purposes. Forefield, Inc is not an affiliate of AXA Equitable. Please consult your tax and legal advisors regarding your individual situation. Neither AXA Equitable nor any of the data provided by AXA Equitable or its content providers, such as Forefield, shall be liable for any errors or delays in the content, or for the actions taken in reliance therein. By accessing the AXA Equitable website, a user agrees to abide by the terms and conditions of the site including not redistributing the information found therein.