<prompt> Human: My wife and I have been gifted some money for purpose of setting up our baby sons future savings, either for college, or for seed money if he chooses not to go to college. It looks like I bonds would be a nice low-risklow-return option that would at least protect against inflation. However, reading the rules on taxing, it looks like putting the bonds in our sons name might not be the right way to do it.Does anyone have a good working knowledge of how taxes would be assessed in the following situations? We the parents own the bonds with our son listed as a the beneficiary. When he goes to college we use the bonds to pay tuition. I cant tell if this would be a way to get the proceeds tax free or not. We the parents own the bonds with our son listed as the beneficiary. He chooses not to go to college, so we cash in the bonds to give him seed money for a business. Paying full tax on proceeds. The bonds are in our sons name, and when he goes to college he uses the bonds to pay tuition my reading of the rules is that he would be taxed on earned interest in this situation. The bonds are in our sons name, and he chooses not to go to college. He pays full tax on the proceeds of the bond sales.I get the impression that if our son goes to college it would be better to have the bonds in our name, while if he doesnt go to college it would be better to have the bonds in his name since presumably hell be in a lower tax bracket than we would when he cashes them out. Am I missing anything?Assistant: Id strongly encourage you to invest that money in something more aggressive than i-bonds, ideally in a 529 plan, but if youre dead set against that then in a regular brokerage account. I-bonds are nice for emergency funds, or as the bond portion of a larger portfolio. But being exclusively invested in them with a 18 year time horizon is conservative to a fault.Human: Im looking into a 529 as well, but Im trying to respect the college or not college spirit of this particular gift. It looks like theres a 10 penalty for a 529 if it isnt used for educational expenses. Maybe thats just a risk well have to take.  <response>: As others have said, UTMA might be the answer. But back to the 10 penalty, if you expect a 7 return over 18 years on a hypothetical 10,000, you still get 30,419 even after the 10 penalty, whereas with an expected 3 return and no penalty you get 17,024. Not even a hard decision. 