I -Bonds pay interest for 30 years, can be withdrawn and used tax-free for education, and have a variable interest rate tied to inflation.

Quick Facts About I-Bonds

• The US Government guarantees the principle- You will not lose money by holding an I-Bond

• Rates are adjusted semi-annually based on the Consumer Price Index (CPI)

• The interest rate you purchase an I-Bond at is applied for 6 months

• $25 minimum if buying electronically, $50 if buying paper

• 3-month interest penalty if cashed before 5 years

• Limit of $10,000 of I-Bond purchases each year

• It cannot be cashed until after 12 months

• Interest compounds semi-annually

• It can be given as a gift

Why I-Bonds As Gifts?

Kids will outgrow toys, and there is usually another family member that will provide gifts of toys. I-Bonds are a gift for the future, not the present. They create future opportunities that require cash - like using them for education expenses which qualify for tax-free gains.

How To Buy I-Bonds

1. Create your free account here: https://www.treasurydirect.gov/

2. Request your intended giftee's full name and social number

3. Purchase the "Gift" I-bonds and hold them in your account

4. Ask the giftee's parents to create a minor-linked account

5. Deliver the Gifted I-Bonds to the minor account number

Buy With Care

Focus on the details when purchasing I-Bonds as gifts and be sure the intended recipients can make an online account. You will be unable to cash gifted I-Bonds that are held in your account. If you are a parent, you can skip the gift-giving and buy directly into the minor-linked account.

Ignore the tradition of buying unneeded gifts, and make your own by purchasing an option for an opportunity.

Ask your guardian to put you on their credit card account (and give you a personal card)

Your guardian(s) will need to make you an authorized user. Then the credit card company will send them a new card with your name on it. This is yours (including all expenses!).

How it works:

When you use this card all expenses go to your guardians’ account – because it is their same account. Your guardians are on the hook for everything you spend (so be sure to pay them the balance monthly!).

While the card account is your guardian’s, the credit history is all yours – treat it with respect and keep your balance under 30% ( I recommend holding a $0 balance at the start of each month).

Things to watch for:

If your guardians aren’t responsible with their money don’t ask for an authorized card. It will hurt your credit score if you (or they) build up debt (buying things without paying them back).

Luckily there are more options to choose from to build credit under 18.

A Federal Student Loan

Builds credit and is the only loan available without a co-signer before turning 18.

How it works:

Start by applying to schools until accepted. Next, go to Studentaid.gov and complete the FAFSA (Free Application For Federal Student Aid) Form (your school’s financial aid office can help with this). Lastly, wait for an offer from your school with a loan amount based on estimated need. Then ask your school’s financial aid office how to accept all, or part of, the loan.

Things to watch for:

Use this only if you absolutely need to take out a loan to go to school. If there is any other alternative I suggest taking it. If the college of your dreams is incredibly expensive, do yourself a favor and find a lower-cost, high-value alternative and save yourself potentially years of fighting debt when you should be building wealth.

Only borrow what you need to avoid paying more in the future.

A credit building loan with an adult cosigner

A credit-building loan is your safest bet for building credit if you work and have your checks direct deposited to your bank each week. This kind of loan builds your credit history (by making regular payments) and builds your credit score. Have the lender set up automatic payments directly from your bank account to avoid missing any monthly payments.

How it works:

You are paying the credit union or bank a small interest fee to help build your credit. The lending company creates a savings account where your installment payments are deposited. Once your term is up, say 12 months, you can collect all of the money in the savings account. Minus the interest of course.

What to watch for (and an example):

Keep the loan amount as low as possible to avoid missing payments (which hurts your credit score). For example, a $1200 dollar loan with a $102 monthly payment – the $2 is interest each month. After 12 months your savings account will have $1200 and the actual cost of the loan will have been $24 (Not a bad price for building credit under 18!).

If you are reading this for yourself or as a parent for your child, congrats!

You're setting yourself or your child up for early success through financial know-how.