[BrodyNoochie]

Instead of just buying gifts for my new goddaughter, I wanted to help set up her financial future. I am not talking about anything major, just starting some sort of college fund or something. I will be making contributions of $25-$50 at a time (probably) a few times a year.

Are Savings Bonds the best way to go or should I look at doing something else?

[ScottGem]

Each state now has tax sheltered college funds. I would look into one of those.

[ebaines]

I agree with ScottG - for this small amount of money you may find it difficult to find other investments besides 529 accounts or Savings Bonds. If you go with the 529 college account, be aware that you need to set it up as a Uniform Gift to Minors Act (UGMA) account, using the child's social security number. You should talk this over with the child's parents, as any taxable transactions in the account over the next 20 years or so will have to reported on their income tax (that's how the "kiddie tax" works), so it would be wise for one of the parents to set up the account as custodian, and then you can make contributions into it. Alternatively, if you go the Savings Bond route, again be sure that the bonds are registered in the child's name and with the child's SS number.

[BrodyNoochie]

Thanks for the help. I was not aware of the 529 accounts. I am going to be looking into them a little bit deeper but I just had a few quick questions about them.
-Will the parent have access to the money if they set it up as a custodian account?
-Do these accounts gain interest and if so what can I expect?
-Who do I go to for setting it up?
-And any other major advantages to doing one of those over doing savings bonds would be greatly appreciated.

Thanks a lot everyone

[KCDave]

You should do your own research and decide what plan is best for you, just Google 529 and you will find more information than you need.

The Best 529 College-Savings Plans - Kiplinger.com is a good place to start.

These accounts gain interest because they invest in mutual funds. You can usually select a pre-configured porfolio, one they allocate or select the funds you want and allocate the portfolio yourself. When I started this I just selected a pre-configure portfolio based on the kids age. These accounts will earn you a lot more interest than savings bonds. There may be minimums to opening the account, so you may want to save a few hundred dollars before starting one.

We, as parents control the account, the grandparents also have an account that they control. But remember, money in these account can only be used for education. However, money can be redistributed from one child to another. You will need to check with your plan as the rules may vary.

Oh! Another nice thing is the money you contribute may be state tax deductible. Maybe some day the Fed will jump on board as well.