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Savings Guide 2006

Savvy savers

  There's more to saving than stuffing your extra cash in a mattress.
Savings: The next big thing
Money market accounts 529 accounts
Christmas/vacation clubs Savings bonds
Money market mutual funds Treasuries

Who it's for

Excellent vehicles for savers looking to invest long-term and who don't mind a relatively low rate of return in exchange for stability and tax-deferred interest. Since you don't pay taxes on the interest until you actually cash them in, they can also be helpful in controlling income for tax purposes.

You can't cash them in for the first year, so they are not a good choice for money you might need immediately.

If either Series EE or I are used for college, then the interest is tax-free. Tuition-tax benefits and a lengthy maturity cycle have long made them a favorite gift for grandparents who want to contribute to a grandchild's education.

Series I bonds pay a rate that's adjusted for inflation, so consumers also use them as a hedge against an economic downturn.

Trying to figure out which options best match your savings strategy? Here are several key points to compare and contrast at a glance.

minimal usually none yes no no complete
$1,000 - $50,000 yes no no no liberal
minimal usually 0 yes no no complete
$500 - $5,000 often yes no yes partial
$500 - $5,000 usually yes no no with penalty
minimal usually 0 no yes yes highly restricted
approx $25 yes yes no no restricted
minimum $1,000 yes yes no no restricted



-- Posted: Oct. 1, 2006

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