When I heard the news that my son and daughter-in-law were expecting their first child, I was overjoyed. I wanted to do something special for my future grandchild, something that would show my love and support for their future. I thought about buying them a savings bond, like my grandparents did for me. But after doing some research, I realized that savings bonds are not the best option for helping my grandchild financially. Here’s why:

• Savings bonds have low returns. Savings bonds are considered a safe investment, but they also have very low interest rates. The current rate for Series EE bonds is 0.1%, and the rate for Series I bonds is 1.68%.
• Savings bonds are taxable. The interest earned on savings bonds is subject to federal income tax and may also be subject to state and local taxes.
• Savings bonds can reduce financial aid eligibility. If I buy a savings bond for my grandchild and put it in their name, it will count as their asset when they apply for college financial aid. This can reduce the amount of aid they qualify for, since students are expected to contribute 20% of their assets.

So, what are some better alternatives to savings bonds? Here are some options that I considered:

• 529 plans. These are tax-advantaged investment accounts that are designed to save for education.
• Roth IRAs. These are retirement accounts that allow you to contribute after-tax money and withdraw it tax-free in retirement.
• Trusts. These are legal arrangements that allow you to transfer money or other assets to a beneficiary, with a trustee managing them according to your instructions.

After weighing the pros and cons of each option, I still haven’t decided which option to choose. Whichever it is, I hope that it will help my grandchild achieve their dreams and show them how much I love them.

Have you thought about how to help your grandchild financially? What option did you choose, and why? I would love to hear your thoughts and experiences in the comments below.