Don't Save With Savings Bonds

Josh asks Dave about the best place to put money for college and life ... he knows it's not savings bonds.

QUESTION: Josh cashed out some Series E savings bonds and got $600 for them. He put them into some EE savings bonds, but knows that’s not the best place for his daughter’s college savings or nest egg. Where can he put that to maximize his daughter’s college fund?

ANSWER: I don’t like a savings bond just because it doesn’t pay much. Those EE bonds are paying about 6%. I would cash them out and put them in growth-stock mutual funds that have been open at least 10 years. If you’re 90% sure she’s going to use it for college, put them in an educational savings account in good growth-stock mutual funds. The stock market is down right now, so that means the stock is on sale. It’s a good time to buy. The stock market has averaged 12% growth, so that makes it better than savings bonds.