Taken together, the miserly interest rates offered on savings bonds, smaller savings bond purchases and easier access to other Treasury securities, are likely to diminish the attractiveness of savings bonds.
Savings bonds, however, offer one major advantage you can't get from other Treasury securities -- tax-free interest is available on savings bonds if they are used to pay for college expenses by an adult meeting income limits set by the IRS.
Also, the tax on savings bond interest is deferred, meaning you do not have to pay it until you cash in your savings bond.
Even with these benefits, it's tough to recommend the trusty savings bond.
The question is, what will grandparents, aunts and uncles do without it?
This work is the opinion of the columnist and in no way reflects the opinion of ABC News.
David McPherson is founder and principal of Four Ponds Financial Planning (www.fourpondsfinancial.com) in Falmouth, Mass. He previously worked as a financial writer and editor for The Providence Journal in Rhode Island. He is a member of the Garrett Planning Network, whose members provide financial advice to clients on an hourly, as-needed basis. Contact McPherson at david@fourpondsfinancial.com
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