Money market mutual funds are not guaranteed by the government, but the bank or brokers usually invest the funds in very safe short-term instruments that have the highest credit ratings. Rates on money market mutual funds are often somewhat higher than for bank money market accounts. However, money market mutual funds do not have to send you a check for up to 3 days. However, because of their great safety and liquidity, many people keep a portion of their total college savings in these types of accounts. Bonds earn interest for as long as 30 years.
Bonds earn market-based rates right from the start.
Savings bonds are completely risk-free since they are Federal Government obligations. The interest rate on a savings bond is usually higher than rates on savings accounts or money market mutual funds. Savings bonds are highly liquid and can be cashed in at any bank in the U.S., not just the bank where you bought them. Good for medium and longer term savings. Although they can be cashed in any time, the maximum interest is obtained by holding them longer.