One tool that can be used to help with saving for your kid’s college education is Education Bonds.
Since the 1930’s US Savings Bonds have been a safe and secure way for consumers to invest their money with no loss to their principal and a guaranteed return on the investment. To use the Education Bonds for your children and their education the bonds must be EE or I Bonds issued January 1990 or later. At the time of purchase the intent of using the Education Bonds for your children does not have to be declared but there are certain specification that must be adhered to.
The person purchasing the Education Bonds for your children must be at least 24 years of age and must register the bonds in their name to take advantage of the tax benefits at a later date. Do not list the child as a co-owner, but children can be listed as a beneficiary and the education exclusion can still apply. If a married couple is purchasing the bonds a joint return must be filed and the tax documents must accurately report both the principal and the interest on the bonds to pay for the qualified educational expenses.
When using Education Bonds for your children and their education it is important to know what qualifies as a valid educational expense. Room and board does not qualify. However, as long as the post secondary institutions, colleges, universities, and various vocational schools participate in federally assisted programs such as a guaranteed student loan program, they should be a qualifying institution and tuition and fees will qualify as the appropriate expenses.