In shock I just recieved £23,500.00 In Premuim Bonds

Glen_Clark

HappyMJ wrote: »

Premium bonds in my opinion aren't very good.

The odds of winning £25 in any one month is 1 in 24,000....so you should if lucky win just under £300 over a year.

Personally I'd cash them in and invest them elsewhere where you will definitely earn/win £500 a year and if you are a gambler put the excess monthly interest into something which has a much better chance of winning....with £200 extra interest a year you could buy 4 lottery tickets each week and have a 1 in 10,000 chance of hitting the jackpot over the 7 years (13,983,816 odds of winning a 6 from 49 lottery/(200 chances * 7 years)) as opposed to 1 in 23,000 of winning a million with P.bonds (45 billion/(12 chances times £23,500))....or of course you could just keep the extra interest and not gamble at all.

Over 7 years you should get £2,100 with P.bonds.

Compounding the interest in a savings account should get you over £3,500...if you manage it well by starting by maxing your ISA allowance now and each year moving an amount from your savings accounts to your ISA to max your ISA allowance each year.

Premium Bond Prize fund is currently 1.5% tax free. Even a basic rate tax payer would struggle to find better than that. So, on average, you would be losing very little.
On the other hand, the lottery only pays out only 50% of the takings in prizes. So, on average, you would be losing half your money. Plus you may be tempted to gamble more than your capital.
I conclude Premium Bonds are a better bet than the lottery.

AlwaysLearnin

....and, although may sound boring, concentrate on your exams. They potentially have as much long term benefit.

inshock1092

Thanks Guys very good advice here.
I want to guarantee £30k so do you think I need to put it in a account that pays 3% for 5 years which will give me around £26000. Then to top up with £4000?.

I actually want to find a way of forgetting I have this money because I am a bit of a gambler. I lost £100 yesterday betting on Manchester United vs West Ham.
If the money was In my account I would have stuck it all that's how confident I was.
Shall I tell my parent to change the password on the account?

Thanks.

notanewuser

inshock1092 wrote: »

Thanks Guys very good advice here.
I want to guarantee £30k so do you think I need to put it in a account that pays 3% for 5 years which will give me around £26000. Then to top up with £4000?.

I actually want to find a way of forgetting I have this money because I am a bit of a gambler. I lost £100 yesterday betting on Manchester United vs West Ham.
If the money was In my account I would have stuck it all that's how confident I was.
Shall I tell my parent to change the password on the account?

Thanks.

With inflation being above 3% the money won't have the same buying power in 5 years, so you won't have made money.

droopsnoot

I can't think of a way you're going to guarantee £30k in five years, based on the rates available at the moment, other than adding the £6500 yourself which is not what you mean. Anything guaranteed is low return, anything higher return is higher risk.

With PBs the only risk (well, certainty) is that interest is eating away at your capital, but you have the chance that it might produce a big prize. My 'return' is around 0.9% per annum based on around four years of holdings, so less than you want. But next month it might jump by £1m if I am spectacularly lucky.

If you have an itchy finger, leave it somewhere that it's hard to cash out, whatever you do. It will be difficult to actually forget you have these, use that as a way to develop the strength of mind to place them out of reach, mentally if not physically.

ozzage

I hate Premium Bonds but I would still leave it where it is.

Otherwise you're going to have too many temptations from the sounds of it. "I'll put it somewhere better... except I'll just take a couple of grand out while I'm doing it to put on that sure bet..."

Leave it for a few years, and keep reading the savings and investments forum here until you've formed your own view on where it might be better put for the long term.

HappyMJ

Glen_Clark wrote: »

Premium Bond Prize fund is currently 1.5% tax free. Even a basic rate tax payer would struggle to find better than that. So, on average, you would be losing very little.
On the other hand, the lottery only pays out only 50% of the takings in prizes. So, on average, you would be losing half your money. Plus you may be tempted to gamble more than your capital.
I conclude Premium Bonds are a better bet than the lottery.

The 1.5% is only paid if you were really very lucky. The £1 million prize skews the amount returned so that one player gets more and everyone else gets less at around 1%. The average winnings when excluding the £1 million prize mathematically are closer to 1.2%...an easily beatable rate.

Premium Bonds are a gamble with the interest. With an ISA and savings accounts it's a guaranteed minimum of £500 a year on £23,500.

Glen_Clark

HappyMJ wrote: »

The 1.5% is only paid if you were really very lucky. The £1 million prize skews the amount returned so that one player gets more and everyone else gets less at around 1%. The average winnings when excluding the £1 million prize mathematically are closer to 1.2%...an easily beatable rate.

Premium Bonds are a gamble with the interest. With an ISA and savings accounts it's a guaranteed minimum of £500 a year on £23,500.

Why would you exclude the chance of getting £1m, any more than the chance of winning the lottery jackpot?
I think you are making this so complicated you are losing sight of the basics.
The fact is, at the end of a year, £100 in premium bonds will pay an AVERAGE of £101.50.
Wheras £100 on the lottery will pay an AVERAGE of £50.
So to suggest the lottery is a better bet than premium bonds is a no-brainer.

xylophone

I wouldn't normally suggest cash based savings with deposit rates so low
BUT given your propensity to spend and the possibility that you might want to buy a house in say five years time, I would suggest a three year fixed rate ISA with the Halifax for £5760 and the rest in a one year bond, reinvesting in ISAs as and when.

What is your tax position? http://www.hmrc.gov.uk/taxon/bank.htm

woody_56

Hi your parents and grandparents come to mind perhaps a treat for them.