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Premium bonds, worth it?

Posted on May 6, 2021 By Philip M No Comments on Premium bonds, worth it?

Premium bonds are a type of saving account, where you are entered into a draw to win money back. The more money you have invested the higher the chance of winning.

NS&I Premium Bonds bundle all the interest together into a monthly prize draw. For every £1 invested you get a chance to win. With the top winner each month winning 1 million pounds, but don’t get your hopes up too much as it is pretty unlikely you will win with the odds standing around 1 in 42m.

Premium Bonds are bought directly through the NS&I website with a minimum purchase of  £25 and a maximum holding of  £50,000. The minimum purchasing age is 16, but you can set an account up for your children in their name. The prize draw is monthly and you can reinvest your potential winnings back in.

What are the estimated returns? With the minimum win being  £25 is very hard to give an estimated return, average returns over time being around the 1% mark. But you are only really likely to see that type of number if you hold over  £5,000 worth. Premium bonds at 1% beat most savings accounts that are an average of 0.4%.

Is my money safe? Yes, Premium bonds can be seen as a very low-risk investment with the fund run by the government. Your funds are also protected by the Financial Services Compensation Scheme (FSCS) with up to  £85,000 being protected.

Would I recommend Premium bonds? YES and NO, they can work really well if you are saving up a large amount of money for a deposit. But your money can be put to better use somewhere else investing. As always having your money spread out over different saving and investing accounts is always good and Premium bonds are a great place to hold larger amounts of cash.

saving Tags:premium bonds, saving

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