Your choices are a Series I bond or a Series EE bond. 

 

If you bought a Series I now, it would guarantee 1.3 percent above inflation over the next 18 years.  An average inflation rate of 3 percent would therefore result in an average 4.3 percent rate.

 

If you bought a Series EE now, it would pay 3.4 percent.  You would receive 3.4 percent each year for 18 years.

 

"If you believe inflation will be 2.1 percent or higher on average, you should buy the Series I bond, but if you believe inflation will be less than 2.1 percent, the Series EE is the better buy," said Daniel Pederson, president of the fee based Savings Bond Informer service for bondholders in Detroit.  "The past couple of years inflation has been around 3 percent, but over the past 15 years, it averaged about 2.5 percent."

 

For appropriate college expenses, interest earned and amounts withdrawn are free of federal, state and local taxes.  Check the specific rules before investing.  For information about savings bonds, go to treasurydirect.gov.  For the rules on college savings, visit treasurydirect.gov/indiv/planning/plan_education.htm