The best thing about some of the available US saving bonds is that they are tax-deferred investments. This means that you won't have to pay tax on them until you cash them out. They appreciate in value over the years tax exempt. Waiting the longest before cashing the bonds out may be a good option for an adult, but what about a child who owns these bonds'
Children get $700 tax credit, dollar for dollar, on all investment income in a tax year. The advantages of this is that instead of leaving the interest to accumulate over the years and then paying tax at the end when you cash out the bonds, a young child with these bonds can withdraw some money each year.
They already get $700 worth of exemption from the government, so they will be paying very little in taxes each year if any. All you need to do is file the child's tax return once to let the government know that you have decided to pay the annual interest on the savings bonds.
