Scott Burns' Articles -- Recent and Archived
Q. My parents gave me $10,000 recently and I want to do something safe with it for my daughter who is 15. I was checking into 'I' bonds. My husband suggested a CD--a local bank has advertised 3.8% for a year. Do you have a recommendation? Am trying to research the pros & cons--want to make a wise choice for her future.
---M.S., by e-mail from Dallas
A. Unless you intend to hold onto the I Savings Bonds for 5 years, when your daughter will be 20, you need to consider the impact of the penalty for redeeming before the security has been held for 5 years. If you redeem an I Savings Bond before 5 years you pay a penalty equal to the 3 most recent months of interest. The longer you hold the security before redeeming, the smaller the burden.
This is NOT a reason to avoid I Savings Bonds. It's just something to consider.
As a practical matter, the I Savings Bond will provide a tax deferred income. Furthermore, the current 3.8 percent yield is very good. According to
http://www.banxquote.com/, the national average yield on 5 year CDs was recently 3.76 percent. And if inflation rises, so will your return.
Learn more about I Savings Bonds
This article contains the opinions of the author but not necessarily the opinions of AssetBuilder Inc. The opinion of the author is subject to change without notice. All materials presented are compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This article is distributed for educational puposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
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About scottb
Scott Burns has covered the changing world of personal finance and investments for nearly 40 years. Today, he ranks as one of the five most widely read personal finance writers in the country. Scott began his career as a newspaper columnist at the Boston Herald in 1977 where he was also the financial editor. Nationally syndicated in 1981 and now distributed by Universal Press, the column appears in newspapers from Boston to Seattle. In 1985 he joined the staff of the Dallas Morning News where his column quickly became one of the most widely read features in the paper. He left the Dallas Morning News in 2006 to become one of the founders of AssetBuilder and its Chief Investment Strategist. Burns is a graduate of Massachusetts Institute of Technology (1962). He has written four books, including "The Coming Generational Storm" (MIT Press, 2004) coauthored with economist Laurence J. Kotlikoff. His fourth book, also coauthored with Kotlikoff, was published in 2008 by Simon & Schuster. The paperback edition will be available in January, 2010. "Spend Til' the End" uses consumption smoothing to demonstrate the errors of conventional financial planning. His business experience includes working as a staffer for a major consulting company and service as a director and audit chairman of a NASDAQ listed manufacturing company. He and his wife now live in Dripping Springs, a "hill country" town about 25 miles outside of Austin.
