U.S. Savings Bonds

• The U.S. Treasury’s savings bond is the only bond that children can own, which means you can purchase the bonds in your child’s name. Savings bonds are registered to a single owner and cannot be bought and sold. The U.S. Treasury issues series EE and series I savings bonds, both of which earn interest for 30 years.
  
  The series EE bond has a fixed interest rate and doubles in value after 20 years. The series I bond has fixed and variable rates. The U.S. Treasury registers U.S. savings bonds and replaces lost or stolen bonds. The interest on savings bonds is not subject to state or local taxes. The federal tax on interest can be deferred until the bond is cashed in or until the bond matures. Savings bonds are available in different denominations, ranging from $25 to $10,000.
  
  

College Savings Bonds

• You may purchase series EE and series I savings bonds to use as college savings bonds for your child in the future. The Savings Bond Education Tax Exclusion allows eligible taxpayers to exclude from their gross income all or part of interest earned on redeemed savings bonds purchased for use as college savings bonds after 1989. The bond must be issued in your name and not your child’s name, although your child can be named as the beneficiary. You must redeem the bond in the same year in which educational expenses occur and pay the expenses to exclude interest on the bonds from your income when you file annual tax return.
  
  

State College Savings Bonds

• You can purchase a state-issued college savings bond to pay for your child’s educational expenses when he attends college. Illinois describes its college savings bonds as tax-exempt bonds that parents can use as a long-term investment toward college expenses for children. The Illinois college savings bonds, which are discount-priced, are exempt from state and federal taxes and backed by the state government. Institutions in Ohio may issue college savings bonds under the authority of the state’s Tuition Trust Authority. Other states have similar college savings bonds authorized by state legislatures to offer a long-term, tax-advantaged method for parents to save for a child’s college education.
  
  

Treasury Bonds

• Treasury bonds are not included as savings bonds in the U.S. Treasury’s description. However, you can use the Treasury bond, or T-bond, to establish a long-term investment for your child. The T-bond has a fixed rate and pays interest to bond holders every six months until the bond matures. You may sell the Treasury bond early or hold it until it reaches full value. The U.S. government pays you the full value of the bond when it reaches the end of its 30-year term. The minimum purchase amount for a Treasury bond is $100.