Saving money is not an easy thing to do.  The economy as it is currently structured places considerable hindrances on our preference to save.  One of these inconveniences is taxes on investments.  Many people are discouraged with the fact that they are taxed on savings and investments after already enduring income taxes.  Fortunately, there are tax efficient investment plans that give you generous tax breaks, and if you meet a certain income criteria, you might not have to pay tax at all. 

Different Tax Efficient Investment Options

The UK has the most advanced tax efficient investment options.  On the other hand, the United States continues to make inroads to provide citizens with various tax free investment options.  The biggest sources of tax efficient investments in the United States are treasury bonds, particularly municipal bonds.  A municipal bond is a local financial tool that allows the government to borrow funds from the public to raise money that goes into the government budget.  The proceeds of these funds are used for various local projects such as infrastructure and education. 

The interest given back to the bond holder is treated as compensation for letting the governments borrow their funds.  The interest paid to bondholders is generally exempted from federal and state taxes.  Municipal bonds are long-term investments, with the usual maturation of 20 years, 30 years, 40 years, or even longer.  Rarely do you find a municipal bond that matures only after a few months. 

Some local bonds are classified as project bonds.  Unlike municipal bonds that raise funds for the government, project bonds are distributed to raise funds for a specific project.  With project bonds, a minimum tax on interest earned is charged, although the tax rates are still lower compared to other types of investments. 

If you do not want to invest directly in bonds, or if you do not have the necessary amount of funds to buy them directly, you can turn to mutual funds that provide tax-free income.  A tax-free fund is another tax efficient investment option geared for people who want to put some of their income as part of a mutual fund that buys municipal bonds.  Since municipal bonds are tax efficient, the benefits of tax-free income on investments are passed on to the members of the tax-free fund. 

There are different types of tax efficient investment funds.  These funds differ based on the type of bonds that they invest in and the length of average maturities.  These tax efficient investments include national tax-free funds, state-specific tax funds, insured tax-free funds, high-yield tax-free funds, short term tax-free funds, and tax exempt cash funds.  Each of them carries various rates and risks. 

High-yield tax free funds are invested on lower rated municipal bonds.  Bonds are rated and reported by credit agencies like Standard and Poor's or Moody's.  Since they are less secure than other tax efficient bonds, they produce a higher yield.  Insured tax-free funds are municipal bonds covered by insurance policies.  If the bond issuer fails to pay bond holders, the insurance guarantees to pay the principal and the interest.  Bond defaults can happen on the municipal level, so you must consider the benefits of insured tax-free funds. 

Reviewing Tax Efficient Investment Options

Tax efficient investment options are the government's way of saying that you have to save money to contribute to nation-building.  However, the value of these options is judged based on alternatives that you can find in the market.  For example, stock investments offer higher returns.  At the same time, the available funds left in your income are used up in various mortgages and loans. 

Some prefer to deal directly with the stock market than bank on government guarantee of secure money.  In some ways, any advantages brought by tax efficient investments may not compete with the promise of high returns from other investment options. 

Tax efficient investment options are the most secure form of investment that you can find.  The security presented by municipal bonds and various tax efficient mutual funds will ensure that you have money saved for the long term.  At the same time, you are essentially investing in the government when you choose these tax efficient plans: tax efficient saving schemes are suited as long-term investments. 

Information on Tax Efficient Investment

To learn more about tax efficient investments and treasury bonds you can go to various investment resource sites and mutual funds.  Fool.com (http://www.fool.com/FoolFAQ/FoolFAQ0010.htm) has a great piece on treasury bonds in the United States.  You can also learn more about mutual fund investment at Franklin Templeton Investments:
https://www.franklintempleton.com/retail/jsp_cm/
education/fund_basic/tax_free/what_are_tf.jsp

Alternatively, you can contact your financial advisor or personal accountant regarding the viability of tax efficient investment options.  It is always a good idea to turn to a professional from the finance industry for advice about appropriate investment options.