The Under 40 Financial Planning Guide: Buy Bonds

U.S. savings bonds offer several tax advantages, and may make sense for you. You buy these bonds at a discount -- a $50 bond costs $25 -- and then cash them in when they reach full face value or mature. The interest builds the value of the bond from $25 to $50, but you pay no taxes until you cash in the bond. Even then you pay no state taxes. This is one way to beat the aforementioned -- I've always wanted to use that word -- Kiddie Tax. Also, if you use the earnings to pay for college education, you may never have to pay taxes.