Saving money for other people

[ElaineMonster]

Ed and I would like to help my nephew out for college. He is six years old now and we have no children, but plan to. We'd like to contibute towards his education, but what's the best method?

We'd like to make sure the money is only spent on college but we can't trust his parents to do that. We also don't want to hurt his chances of receiving financial aid so should we keep it in our names until he gets older? (He will most certainly qualify for financial aid unless my sister wins the lottery).

What are the tax implications for us if we choose to save this money for him in our names rather than his? Seems like we should put it in his name if we can trust that his parents won't steal it or let him spend it early, but I'm not sure we can cound on that.

We were thinking bonds, by the way, because we think giving him bonds every birthday and holiday would help him learn about money, without much risk. Are bonds a good instructional tool for kids? (We're sorta using my nephew as a guinea pig to test this stuff out on before we have our own kids. heh)

Thoughts?