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Long term Savings Gift to child?

I would like to give a savings gift to my Goddaughter for first birthday and subsequent birthdays. The goal is to save money to apply towards college, but I am not her parent so I can not force her/guarantee that monies will be applied towards college expenses. Reading has revealed that EE and I-government savings bonds are low yield and may not reach face value. Whole Life Insurance was another suggestion but fees could be high. Stock certificates, mutual fund investments will yield high returns over the 18 years. Certificate of deposit was also suggested but what if i-rates increase over 18 years and I am locked in? Education IRA would require withdrawals to be towards education expenses to qualify as tax free. WHAT IS YOUR RECOMMENDED SAVINGS GIFT TO MAXIMIZE INTEREST?

Public Comments

1. At this stage, a Mutual Fund - carefully selected - might be the starting point held In Trust for Junior. If on the other hand you are looking at a substantial dollar amount, carefully selected stock portfolio is the way I would go.
2. Hey do it like they used to do it in the old days, You know the govenment will never go broke so invest in it. And you don't have to wait so long for the face value and if you need money you can cash them in anytime. And if you start now by the time your grand daughter is older enought o go to college she will have more than enough money if you buy government bonds. you pay for half the face valve on them and when they mature they will have full value.
3. If the purpose of your gift is college education then by all means set up a 529 college savings plan. You do not need to be the parent/guardian to establish and invest the funds for the beneficiary (your goddaughter). The funds will grow tax deferred and will be qualified to be withdrawn tax free if used for qualified college tuition/expenses and you control the funds while she is a minor. The chances are very high that your goddaughter will seek a college education and having a source of funds set aside for her will only encourage her to become college educated. The worst case scenerio is that she will not attend college and she will have a tax obligation on the earnings but big deal...the potential tax advantages and the message you are sending that you are encouraging her to go to college far outweigh any potential tax liability she may encur if she opts not to become college educated.
4. None of the examples you given are good. The best way to save for a child's education is a 529 Plan. In my opinion, these are the best plans. You should check for your state's 529 Plan and then check with other states. If you want to read more info about 529 Plans, check this link: http://obe231.blogspot.com/2006/12/529-plan.html To review each state's 529 plan, go here: http://www.savingforcollege.com/ Under any circumstances, never use life insurance as an investment for the future. Life insurance soul purpose is to protect your family from income loss in case you die. If no one is dependent on your income, then you shouldn't need life insuance.