Perhaps you are struggling to find that oh-so perfect Christmas present for your children or grandchildren. Well, join the club, because it seems like it gets harder and harder each year. You ask yourself if those kids really need another toy, another gadget or more clothes that will just be out of style next year or, much more likely, next month!

Every year, banks all over the US push savings bonds on ill informed grandparents and parents, urging them to buy these bonds to “help pay for college”. While it is no doubt better for their future than the latest ipod, there are much better ways to pay for college.

I suggest that you look into some sort of investment vehicle, such as the 529 plan. The 529 plan (the exact details vary from state to state) allows you to put after tax dollars into an account that grows tax deferred and can be withdrawn tax free for qualified educational expenses. The funds are invested in mutual funds that can be tracked and followed on the Internet or in the local paper and you are allowed to move the money between funds in the plan.

Even if you did not opt to use a 529 plan, or if you live outside the US, it is still a good idea to skip the savings bonds and buy your grandchild a stock or a mutual fund. After all, the sooner they learn about investing in equities, the more likely they are to be comfortable investing when they get older.