Am I better off buying tax-free bonds?

Tax-free bonds make sense if you are in a high tax bracket. They normally pay lower interest rates than comparable bonds that are not exempt from federal taxes. Tax-free bonds rarely make sense for college students because:

• You are likely in a low tax bracket.
• You should be investing for growth, not income.

How are savings bonds different from other kinds of bonds?

Unlike Treasury securities, U.S. Savings Bonds are non-transferable. You can only buy them or cash them in through the issuer, the federal government. There is no secondary market for U.S. Savings bonds.

Savings bonds are also taxed differently. For example, your interest may be exempt from taxes if you redeem your savings bonds to pay for tuition expenses.