---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
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