The Role of Bonds and Fixed Income: When and How to Add Them to Your Teen’s Portfolio

Ask most parents which part of a portfolio is the safe part, and they’ll say bonds. Then look at 2022. That year, 10-year U.S. Treasury bonds lost 17.83%, according to annual return data kept by NYU finance professor Aswath Damodaran, nearly as much as the 18.04% drop in the S&P 500. Over the same year, a fund holding 1- to 3-year Treasuries lost 3.88%, and 3-month Treasury bills gained 2.09%. All three were loans to the same borrower, the U.S. government. What separated them was how long each loan ran.

That’s the real lesson about bonds for a child’s money. They aren’t one thing, and they aren’t automatically safe. The right kind depends on the job you need it to do and, above all, on when you’ll spend the money. As your child moves through the teen years, more of their savings is headed for a deadline, whether that’s the first tuition bill, a first car, or a first apartment, so this is when bonds and other fixed income start to matter. This guide explains what bonds actually do, when to add them, which kinds fit which goals, how they’re taxed in each account, and how to make the shift without selling at the wrong time. It’s part of The GoodNest Guide to Investment Strategies & Portfolio Allocation, and it fills in the bond side of Building a Target-Date Glide Path.

What bonds and fixed income are

A bond is a loan. When you buy one, the SEC’s investor guide to bonds explains, you’re lending money to the issuer, which may be a government, a municipality, or a corporation. Bonds pay interest along the way, and if you hold one to maturity, you get its face value back plus interest. The exception is a default, when the issuer fails to make its interest or principal payments on time.

“Fixed income” is the wider family. Alongside bonds issued by the U.S. Treasury, companies, and state and local governments, it includes the places families keep money they can’t afford to lose: bank savings accounts and certificates of deposit (CDs), money market funds, Treasury bills, and U.S. savings bonds. Bond funds, which pool hundreds or thousands of bonds, are how most families own bonds in practice, and they’re what the bond options in 529 plans are built from.

Every kind of fixed income carries some mix of three risks:

• Interest rate risk. When interest rates rise, existing bonds lose value, because new bonds pay more. FINRA’s guide to bonds, interest rate changes, and duration explains that for every 1 percentage point change in rates, a bond’s price tends to move by about its duration in percent, in the opposite direction. Duration rises with the length of the bond, so longer bonds swing more.
• Credit risk. The issuer might not pay. The SEC’s guide notes that high-yield bonds have lower credit ratings, and so more credit risk, than investment-grade bonds, which is why they pay higher interest.
• Inflation risk. Fixed payments buy less as prices rise. Even cash has this problem: the SEC’s guide to money market funds warns that low yields leave a risk of inflation outpacing your returns over time.

Different kinds of fixed income trade these risks off in different ways. That’s why the real question isn’t whether to own bonds, but which bonds, for which money.

The three jobs bonds do, and the one they can’t

Job 1: Cushioning a stock crash

High-quality bonds have often risen when stocks fell. In Damodaran’s data, the S&P 500 lost money in 26 calendar years from 1928 through 2025, and 10-year Treasury bonds gained in 21 of those years. In 2008, when stocks lost 36.55%, 10-year Treasuries gained 20.10%. A cushion like that is what lets a family rebalance after a crash instead of selling stocks at the bottom.

The cushion depends on quality. According to a December 2009 bond market review from Robert W. Baird & Co., citing Barclays Capital index data, the Treasury sector returned 13.74% in 2008 while high-yield corporate bonds lost 26.16%. Junk bonds tend to fall when stocks do, because the same weak economy that drags down stock prices makes defaults more likely. They don’t belong in the safe part of a child’s portfolio.

Even high-quality bonds don’t always hold up. Stocks and 10-year Treasuries fell together in five of those 26 years: 1931, 1941, 1969, 2018, and 2022. The bond loss in 2018 was just 0.02%, but 2022 was the worst year for 10-year Treasuries in Damodaran’s records, which go back to 1928.

Job 2: Holding value for a bill with a date on it

This is the job that matters most for a teenager’s money. When a tuition bill is due in two years, you need the money to be there, not to have a good chance of growing. Short-term, high-quality fixed income does this job well. Three-month Treasury bills didn’t have a single losing year in Damodaran’s data, and the 1- to 3-year Treasury fund lost just 3.88% in 2022, a year when the Bloomberg U.S. Aggregate Bond Index, a broad gauge of the U.S. bond market, lost 13.01%, according to Global Financial Data. Bond manager Western Asset called it by far the index’s worst year since it began in 1976. Longer bonds can do this job too, but only if they mature by the date you need the money, as the sections below explain.

Job 3: Keeping up with inflation

Ordinary bonds pay fixed amounts, so inflation eats into them. Two kinds of Treasury securities are built to resist it. Treasury Inflation-Protected Securities, or TIPS, have a principal that goes up with inflation and down with deflation, and at maturity you get the adjusted principal or the original principal, whichever is greater, according to TreasuryDirect’s guide to TIPS. Series I savings bonds earn a rate that combines a fixed rate with an inflation rate that changes every six months, according to TreasuryDirect’s comparison of TIPS and I bonds. Both come with catches for a teenager’s money, covered below.

What bonds can’t do: grow like stocks

Every one of those jobs costs something in growth. From 1928 through 2025, Damodaran’s data works out to about 10.0% a year for the S&P 500, about 4.5% for 10-year Treasury bonds, and about 3.4% for Treasury bills, before inflation. Over the 81 overlapping 18-year periods in that span, roughly the length of a childhood, stocks beat 10-year Treasuries in 78. The median 18-year result was about $6.05 for every $1 in stocks, compared with about $2.07 for every $1 in 10-year Treasuries and $1.82 in Treasury bills.

So bonds belong in a child’s portfolio in proportion to how close the money is to being spent, and not much sooner. A newborn’s nest egg held mostly in bonds gives up years of growth to guard against a drop it has plenty of time to recover from. The GoodNest Guide to Investment Strategies & Portfolio Allocation compares stocks with a mix of stocks and bonds over holding periods of different lengths.

When to add bonds: follow the deadline, not the birthday

The right time to add bonds depends less on your child’s age than on when each pot of money will be spent. A 16-year-old can have money that’s due in two years and money that’s due in fifty, and the two shouldn’t be invested the same way. Here’s how that plays out for the goals families most often save for:

Percentages come from the hypothetical sample glide path in Building a Target-Date Glide Path and describe freshman-year money, assuming college starts at 18. They’re an example, not a recommendation.

For college money, Building a Target-Date Glide Path lays out a sample schedule in which money that’s 13 or more years away holds 10% in bonds, mostly as a reserve to rebalance from after a bad year for stocks. The bond share rises gradually, then faster about five years out. Freshman-year money holds 40% in bonds and 5% in cash at ages 12 and 13, then 45% in bonds and 20% in cash at 14 and 15. At 16 it’s 40% bonds and 40% cash, and from 17 on it’s all cash. Money for the later years of college follows the same path a year or more behind.

So the teen years are when the bond and cash share of college money climbs fastest, and they’re also when the kind of bond starts to matter most. With five or six years to go, a broad bond fund can do the job. With two years to go, only short-term bonds and cash fit. The next section explains why.

Two kinds of accounts follow different rules. A custodial Roth IRA, funded with a teen’s own earnings, is usually retirement money four or five decades away, so most families leave it in stocks. The Custodial Roth IRA explains how it works. A Trump Account can’t hold bonds for most of childhood. Under IRS Notice 2025-68, until January 1 of the year your child turns 18, a Trump Account can hold only mutual funds or ETFs that track an index of mostly U.S. companies, don’t use leverage, and charge no more than 0.1% a year. If you plan to use one for college, do the de-risking in your other accounts so the household as a whole stays on track. The 530A Trump Account Explained has the details.

Match the bond to the date

Here’s the most useful rule for choosing bonds for a child’s money: the closer the deadline, the shorter the bond.

The reason is duration. Morningstar describes a common rule of thumb: for every 1-percentage-point rise in interest rates, a bond fund can be expected to lose about its duration in percent. Morningstar adds that if you’re worried about rising rates, avoiding long-term bond funds is a good place to start. Long-term bond funds often have average durations of 15 years or more, according to The Motley Fool, so a 1-point rise in rates could cost them about 15%. By the same rule, a short-term fund with a duration of 2 would lose about 2%.

Duration also tells you roughly how long a bond fund needs to earn back a loss caused by rising rates. Writer Nick Maggiulli explains at Of Dollars And Data that duration approximates how long it takes to recover from a drop in bond prices, assuming the income is reinvested at the new, higher rates. That’s why matching matters. If a fund’s duration is shorter than the time until you need the money, the higher income that follows a rate rise has time to make up the loss. If the bill comes due first, you may have to sell at a loss. The Fool’s advice says the same thing in plain terms: match your expected holding period to the duration of the bond or fund.

• 3-month Treasury bills
• 1- to 3-year Treasuries
• 10-year Treasury bonds

Calendar-year total returns. Treasury bills, 10-year Treasury bonds, and the S&P 500 come from Damodaran’s annual data. The 1- to 3-year Treasuries are the iShares 1-3 Year Treasury Bond ETF (SHY), after its fees, from Total Real Returns. Past returns don’t predict future ones.

See the numbers

Calendar-year returns in 2008 and 2022

Investment	2008	2022
3-month Treasury bills	+1.40%	+2.09%
1- to 3-year Treasuries	+6.62%	−3.88%
10-year Treasury bonds	+20.10%	−17.83%
S&P 500, for comparison	−36.55%	−18.04%

The chart shows the trade-off with three kinds of Treasuries, so credit risk doesn’t cloud the picture. In 2008, the longer the bond, the bigger the cushion: 10-year Treasuries gained 20.10% while stocks lost 36.55%. In 2022, the longer the bond, the bigger the loss, as rising rates pushed 10-year Treasuries down 17.83%. The 1- to 3-year fund landed in between both times, up 6.62% in 2008 and down 3.88% in 2022, and Treasury bills stayed positive in both years.

For a child’s money, that suggests a simple progression:

• Five or more years away: an intermediate-term or total bond market fund can serve as the cushion next to stocks.
• Two to five years away: shift toward short-term bond funds, CDs, or individual Treasuries that mature before the bill.
• About a year away or less: use cash equivalents, such as a savings account, a money market fund, Treasury bills, or your 529 plan’s most conservative option.

To check where a fund fits, look up its average duration, which fund companies publish for their bond funds, and compare it with the years until you’ll spend the money.

Which kind of fixed income fits which job

Here’s how the main kinds of fixed income line up, with the best use for each and the catch that comes with it.

Returns are calendar-year figures from the sources cited in this article: the iShares 1-3 Year Treasury Bond ETF, Global Financial Data, and Barclays Capital index data reported by Baird. Past returns don’t predict future ones.

Savings, CDs, money market funds, and Treasury bills

For money due within a year or two, the goal is simply to keep it. FDIC insurance covers bank deposits, CDs included, up to $250,000 per depositor, per FDIC-insured bank, per ownership category, according to the FDIC’s deposit insurance FAQs. CDs pay a fixed rate for a set term. The Cooperative Extension’s guide to certificates of deposit explains that withdrawing early costs a set number of days of interest, and if the penalty is larger than the interest earned, the difference comes out of your principal. Money market funds aren’t FDIC-insured, but the SEC describes them as relatively low risk compared with most other investments. Treasury bills mature in a year or less, and like other Treasury securities, their interest is exempt from state and local income taxes, according to TreasuryDirect’s TIPS fact sheet.

Bond funds: short, intermediate, and long

Short-term bond funds, especially those that hold Treasuries, are the workhorse for money two to five years away. They pay more than cash in most years, and their prices barely move compared with longer funds. Intermediate-term and total bond market funds suit money five or more years off, where they’re the cushion next to stocks. Long-term bond funds swing the most of all, as 2022 showed, and rarely fit a child’s money.

TIPS are worth a closer look, because inflation protection doesn’t mean stable prices. Before maturity, a TIPS fund rises and falls with interest rates like any other bond fund. In 2008, Baird’s review shows, the TIPS index lost 2.35% while the Treasury sector gained 13.74%. Held to maturity, an individual TIPS returns its inflation-adjusted principal, which makes TIPS a better fit for money with a fixed date than for money you might need at any time.

Bonds that don’t fit: junk bonds and municipal bonds

High-yield bonds fail the cushion test, as 2008 showed. Municipal bonds fail for a different reason, their tax break. The SEC’s investor bulletin on municipal bonds notes that their interest is generally exempt from federal income tax, and that because of this benefit, they usually pay less interest than taxable bonds of similar maturity and credit quality. That trade can make sense for a parent in a high tax bracket. It rarely does for a child, whose investment income is often taxed lightly or not at all, and it never does inside a 529 plan or a Roth IRA, where the interest isn’t taxed anyway.

Bond funds, individual bonds, and ladders

Most families own bonds through funds, and inside a 529 plan that’s usually the only choice, because plans offer a menu of portfolios rather than individual bonds. Funds are diversified and easy to add to a little at a time. Their drawback is that a fund never matures. It keeps buying new bonds as old ones come due, so the price you get when you sell depends on interest rates that day.

An individual bond or CD works differently. Hold it to maturity, and as long as the issuer pays, you get its face value back no matter what rates did in between, as the SEC’s bond guide notes. That makes individual Treasuries and CDs a natural match for a bill with a date on it. Line up several so that one matures before each bill, and you have a ladder. A 2025 ABC 17 News explainer on laddering describes ladders of Treasuries or FDIC-insured CDs with staggered maturities, and notes the catch: if you need money before a rung comes due, you may owe a bank CD’s early withdrawal penalty or lose some principal selling a bond or brokered CD early. The same explainer notes that some ETFs now build ladders for you, if they’re structured to fit your goals.

For college, a ladder might look like this. Say your son is 15 and will start college in the fall of 2029. In a custodial account or your own brokerage account, you could buy a Treasury note or a CD that matures in the summer of 2029 for freshman year, another that matures in the summer of 2030 for sophomore year, and so on, adding to each rung as gifts and contributions come in. Each rung turns into cash on the date you need it and earns interest in the meantime. Inside a 529, you can get a similar effect by moving each year’s money into the plan’s short-term, stable value, or FDIC-insured savings option, where offered, as its date approaches.

Ladders work best with individual Treasuries and CDs held to maturity. Corporate bonds add credit risk, and municipal bonds add a tax break your child probably can’t use. If managing rungs sounds like too much, a short-term Treasury fund for money two to five years away, plus cash for next year’s bills, gets you most of the way there.

Savings bonds: the classic gift, with catches

U.S. savings bonds have been a grandparent favorite for generations, and they’re easy to buy for a child today. According to TreasuryDirect’s guide to buying savings bonds, a parent can open a TreasuryDirect account for a child that’s linked to the parent’s own account and buy bonds for the child there, and other people can buy savings bonds as gifts that go into the child’s linked account. Electronic bonds can be bought in any amount from $25 to $10,000, and each owner can buy up to $10,000 in electronic I bonds and another $10,000 in electronic EE bonds in a calendar year.

I bonds are usually the better fit of the two. Their rate tracks inflation, and they don’t have a market price that drops when interest rates rise: according to TreasuryDirect’s savings bond basics for kids, an I bond can be cashed after one year for at least what you paid. For a teenager’s college money, though, three rules matter:

• The money is locked for a year. TreasuryDirect’s comparison notes that I bonds can be cashed only after 12 months, so money due within a year doesn’t belong in a new I bond.
• Cashing early costs interest. The same comparison puts the early-cashing penalty at three months of interest, and the basics page explains that you won’t get all the interest if you cash a bond before it’s five years old.
• Bonds in a child’s name miss the education tax break. Savings bond interest can be tax-free when used for college, but only if the owner was at least 24 when the bond was issued. TreasuryDirect’s page on registering savings bonds spells it out: if you plan to use the exclusion, don’t register the bond with the child as owner. The child can be the beneficiary instead. TreasuryDirect’s guide to using bonds for higher education adds an income limit and requires cashing the bonds in the same tax year you pay the qualified expenses.

EE bonds are a harder fit for teens. They pay a fixed rate and are guaranteed to at least double in value if held 20 years, according to the same basics page, but a teenager’s college bills come due long before that. If a grandparent bought EE bonds at your child’s birth, the doubling arrives around age 20, partway through college, so check the value and timing before cashing them early.

If relatives ask what to give instead of toys, savings bonds are one answer and a 529 contribution is another. Discussing Wealth with Grandparents has scripts for that conversation.

Where bonds should live: taxes by account

Bonds are less tax-friendly than stocks. Vanguard’s guide to asset location explains that bond interest is taxed at ordinary income rates, while long-term capital gains and qualified dividends from stocks are taxed at lower rates, which is why the simplest version of asset location is often summed up as “bonds in traditional, stocks in taxable.” For a family, the idea translates like this: when two accounts are saving for the same goal, hold the bonds in the one where interest isn’t taxed.

Federal rules for 2026. State rules vary, and savings bond interest can be deferred until the bond is cashed.

The difference shows up most in a custodial account, where interest is your child’s income. Under Revenue Procedure 2025-32, the first $1,350 of a child’s investment income is tax-free in 2026, the next $1,350 is taxed at the child’s rate, and anything above $2,700 can be taxed at the parents’ rate. Bond interest counts toward those amounts every year, whether or not you spend it, while a stock index fund does most of its growing in value and is taxed mainly when you sell. If you have both a 529 and a custodial account for college, putting the bond share in the 529 can keep the custodial account’s taxable income lower. Navigating the 2026 Kiddie Tax Thresholds walks through the math.

A few other tax details are worth knowing:

• Treasury interest skips state and local income taxes. That includes Treasury bills, notes, bonds, and TIPS, as well as savings bonds. In a state with no income tax or a very low one, the ABC 17 News explainer notes, a CD that pays more than a Treasury of similar length may be the better choice.
• TIPS can create tax on money you haven’t received. According to TreasuryDirect’s TIPS fact sheet, owners pay federal tax on interest in the year it’s paid and on growth in principal in the year it occurs, even though the larger principal isn’t paid out until the TIPS matures. In a custodial account, that’s taxable income with no cash attached, so TIPS fit better inside a 529 or an IRA.
• I bond interest can wait. TreasuryDirect’s comparison explains that federal tax on I bond interest can be deferred until you cash the bond or it matures, or reported each year instead, and that the interest is exempt from state and local income taxes.
• Municipal bonds rarely pay off for a child, for the reasons above.

How to add bonds without selling at the wrong time

Once you know how much should be in bonds and which kind, the remaining question is how to get there. This routine keeps taxes and trading to a minimum:

1. Count the bonds you already own. An age-based 529 portfolio or a target-date fund may already hold bonds and cash. Add them up before you buy more, so you don’t end up more conservative than you meant to be.
2. Steer new money first. Contributions, birthday gifts, and reinvested dividends can go straight to the bond or cash side. Under Section 529(b)(4) of the tax code, you can change how money already in a 529 is invested no more than twice per calendar year, but Saving for College’s guide to changing a 529 beneficiary notes that you can always pick a different investment option for new contributions.
3. Rebalance on a schedule. Pick one or two dates a year, such as your child’s birthday, and move money back to your targets then, rather than in response to headlines.
4. Sell carefully in a custodial account. Selling stock at a gain creates taxable income for your child. Under the IRS’s Topic 409 on capital gains and losses, a gain on an investment held one year or less is taxed at ordinary income rates, while one held longer may be taxed at a lower rate, so trim in small amounts across tax years and favor shares held more than a year.
5. Shorten the bonds as the date nears. Every year or so, move each pot of money one step toward short-term bonds and cash, so the duration stays shorter than the time that’s left.

Gifts from family make step two easy. When grandparents, aunts, uncles, and friends want to give for a birthday, a holiday, or a graduation, GoodNest can collect their gifts, often alongside a small keepsake. Guests give from your child’s GoodNest page and send the money straight to you by Zelle, Venmo, or PayPal. GoodNest never holds or invests it, so you decide where each gift goes: into the stock fund while a goal is far off, or into the next rung of a Treasury ladder or the 529’s short-term option as the date gets close. The GoodNest Guide to Asking for Investments Instead of Toys has ideas for starting that conversation, and Automating the Nest Egg shows how to put your own contributions on autopilot.

Teaching your teen how bonds work

Bonds make a great teaching tool for teenagers, because the core idea fits in one sentence: a bond is a loan, and the longer the loan, the more its value swings when interest rates change. A few ways to make it stick:

• Show them the seesaw. Walk through the chart above together and ask why a 10-year Treasury lost so much more than a Treasury bill in 2022, when both were loans to the same government. The answer is time: the bill came due within months and could be reinvested at the new, higher rates, while the 10-year bond was stuck paying the old rate for years.
• Read a fund fact sheet. Pull up the bond option in your 529 plan, or a bond fund in their own account, and find four numbers: the yield, the average duration, the credit quality, and the expense ratio. Then ask what would happen to the fund if rates rose by 1 percentage point.
• Let them choose the tool for their own goal. If your teen is saving summer job money for a car in 18 months, have them compare a savings account, a CD, and a Treasury bill, and explain why stocks and long-term bonds don’t fit. The same reasoning will guide every big purchase they ever save for.
• Look at an I bond together. If they own one, show them how its rate changes every six months with inflation. It’s a hands-on way to see why inflation matters.

Younger kids can start with the basics in Middle School (Ages 11-14), and High School (Ages 15-18) covers first paychecks and accounts. As the handoff approaches, The “Wealth Transfer” Conversation can help you explain why the money near the finish line is invested so cautiously.

Mistakes to avoid

• Treating all bonds as safe. Ten-year Treasuries lost 17.83% in 2022, and high-yield bonds lost 26.16% in 2008.
• Going long for a short goal. A long-term bond fund holding money that’s due in two years is a bet on interest rates, not a safe harbor.
• Reaching for yield. Extra yield usually comes from lending for longer or to a riskier borrower, and both add risk to money you can’t afford to lose.
• Adding bonds too early. Stocks beat 10-year Treasuries in 78 of the 81 overlapping 18-year periods from 1928 through 2025.
• Buying I bonds for next year’s bill. They can’t be cashed for 12 months, and cashing them before five years costs three months of interest.
• Registering college savings bonds in your child’s name. They won’t qualify for the education tax exclusion. Register them to a parent who is at least 24, with the child as beneficiary.
• Holding bonds where interest is taxed when a tax-free spot is open. If a 529 and a custodial account share a goal, the bonds usually belong in the 529.
• Forgetting the Trump Account rules. It can’t shift toward bonds before January 1 of the year your child turns 18, so balance it with your other accounts.

The bottom line

Bonds earn their place in a child’s portfolio by doing specific jobs: cushioning stocks, holding value for a bill with a date on it, and protecting against inflation. Add them as each goal’s deadline approaches, not on a birthday. Choose high-quality bonds whose duration is shorter than the time left, move to short-term bonds and cash in the final years, and use cash for anything due within about a year. Keep the bonds where their interest isn’t taxed when you can, steer new money and gifts before you sell anything, and leave long-term money like a teen’s Roth IRA in stocks.

Done this way, bonds don’t hold your child’s nest egg back so much as protect it at the moment it matters most. For how bonds fit with the rest of your child’s investments, return to The GoodNest Guide to Investment Strategies & Portfolio Allocation.

Frequently asked questions

When should I start adding bonds to my child’s investments?

When a goal is getting close, not on a particular birthday. In the sample glide path this guide draws on, college money holds a small bond share while college is more than a decade away, reaches 40% in bonds about five or six years out, and moves into cash over the final two years. Long-term money, such as a custodial Roth IRA, usually needs no bonds at all.

What kind of bonds are best for college money that’s a few years away?

High-quality, short-term ones. Short-term Treasury funds, CDs, and individual Treasuries that mature before the bill fit money two to five years away, and cash equivalents fit money due within about a year. In 2022, a 1- to 3-year Treasury fund lost 3.88%, while 10-year Treasury bonds lost 17.83%.

Are bonds safe for my teenager’s money?

Some are, for some jobs. Treasury bills didn’t lose money in any year from 1928 through 2025 in Damodaran’s data, but 10-year Treasury bonds lost 17.83% in 2022 and high-yield corporate bonds lost 26.16% in 2008. Safety depends on credit quality and on how the bond’s length compares with when you’ll need the money.

Should I buy I bonds for my child’s college fund?

They can work for money that’s at least a year away, and ideally five or more, but they come with catches. You can’t cash them for 12 months, you give up three months of interest if you cash them before five years, purchases are capped at $10,000 per owner per calendar year, and bonds registered in a child’s name don’t qualify for the education tax exclusion, which requires an owner who was at least 24 when the bond was issued.

Can a Trump Account or a custodial Roth IRA hold bonds?

A Trump Account can’t until January 1 of the year your child turns 18, because until then it’s limited to low-cost index funds of mostly U.S. stocks. A custodial Roth IRA can hold bonds, but since it’s usually retirement money decades away, most families leave it in stocks and keep the bonds in accounts with nearer deadlines.

Sources

• Aswath Damodaran, NYU Stern School of Business, “Historical Returns on Stocks, Bonds and Bills” (annual data from 1928 through 2025, updated January 5, 2026).
• Total Real Returns, “SHY: iShares 1-3 Year Treasury Bond ETF” (nominal total returns with dividends reinvested, data through July 24, 2026).
• U.S. Securities and Exchange Commission, Investor.gov, “Bonds” (accessed October 2, 2026).
• FINRA, “Brush Up on Bonds: Interest Rate Changes and Duration” (accessed October 2, 2026).
• U.S. Securities and Exchange Commission, Investor.gov, “Money Market Funds” (accessed October 2, 2026).
• Robert W. Baird & Co., “Bond Market Comments” (December 2009), citing Barclays Capital index data.
• Global Financial Data, Investment Office, “The Lost Decade” (accessed October 2, 2026).
• Western Asset, “US Broad Market Strategy Update” (accessed October 2, 2026).
• TreasuryDirect, “Treasury Inflation-Protected Securities (TIPS)” (accessed October 2, 2026).
• TreasuryDirect, “Comparison of TIPS and Series I Savings Bonds” (accessed October 2, 2026).
• Internal Revenue Service, Notice 2025-68, guidance on Trump Accounts (December 2025).
• Morningstar, “How to Stress-Test a Portfolio’s Interest-Rate Sensitivity” (2025).
• The Motley Fool, “Bond Duration: 3 Things to Know Before Buying Bonds” (May 6, 2015).
• Nick Maggiulli, Of Dollars And Data, “Why You Don’t Lose Money in Bonds (If You Wait Long Enough)” (accessed October 2, 2026).
• Federal Deposit Insurance Corporation, “Deposit Insurance FAQs” (accessed October 2, 2026).
• Extension Foundation, Personal Finance, “Investing Unit 5: Certificates of Deposit” (accessed October 2, 2026).
• TreasuryDirect, “Treasury Inflation-Protected Securities (TIPS)” fact sheet (PDF) (accessed October 2, 2026).
• U.S. Securities and Exchange Commission, Investor.gov, “Investor Bulletin: Municipal Bonds” (accessed October 2, 2026).
• ABC 17 News, “Make Your Money Work for You by ‘Laddering’ Bonds or CDs” (August 16, 2025).
• TreasuryDirect, “Buying Savings Bonds” (accessed October 2, 2026).
• TreasuryDirect Kids, “Savings Bonds” (accessed October 2, 2026).
• TreasuryDirect, “Registering Your Savings Bonds” (accessed October 2, 2026).
• TreasuryDirect, “Using Bonds for Higher Education” (accessed October 2, 2026).
• Vanguard, “Asset Location Can Lead to Lower Taxes” (accessed October 2, 2026).
• Internal Revenue Service, Revenue Procedure 2025-32, inflation adjustments for 2026 (2025).
• Legal Information Institute, Cornell Law School, 26 U.S. Code § 529, Qualified tuition programs (accessed October 2, 2026).
• Kathryn Flynn, Saving for College, “Why You Should Change Your 529 Plan Beneficiary” (updated May 18, 2020).
• Internal Revenue Service, “Topic No. 409, Capital Gains and Losses” (accessed October 2, 2026).

This article is for general educational purposes only and is not investment, tax, or legal advice. The glide path percentages are a hypothetical example from another GoodNest article, not a recommendation for any particular family. Historical returns come from the sources cited and don’t predict future results, and investing involves risk, including possible loss of principal. Bond, savings bond, and account rules and tax figures can change, so confirm the details with TreasuryDirect, your plan, your fund company, or a qualified professional. GoodNest does not provide tax, legal, or investment advice and does not hold or invest funds.