Treasury Inflation-Protected Securities (TIPS) (inflation-protected treasury bonds) are a unique animal, and are often discussed here (I've learned a lot from Larry Swedroe). TIPS break out inflation separately compared to nominal bonds, which lump together real return plus expected inflation, and thus you get protection against unexpected inflation. With TIPS, you are guaranteed an inflation adjustment that is tied to the CPI. Average duration doesn't matter so much as the real return, which is currently around 1%. So, for example, if inflation is 3%, the total yield will be around 4%.

Compare that to a 1-year CD or a short-term bond fund that pays around 3%, and that is a 1% advantage. Or, compare that to a money market that pays around 2%, and that is a 2% advantage. Move up in risk to an intermediate-term bond fund, and that might be 5%, so you start to lose ground if inflation stays in check. If inflation, as defined by the CPI, were to rise substantially (i.e., beyond what the market prices into nominal bonds), TIPS will win. On the other hand, if inflation rises, the interest rates on all nominal bonds will rise, so it can be a difficult decision. What you really get with TIPS is inflation insurance in case the bond market guesses wrong on expected inflation.

With that said, the TIPS market seems to have been on fire lately, and it could be due for a correction, as the values fluctuate up and down. A bubble maybe? Who knows?

What would I do? I would pick an intermediate-term bond fund, where the duration is roughly equal to 5 years, i.e., the time your son will spend the money. This is just one opinion, and hopefully you'll get a few more here. Good luck.

Dan