ISA, premium bonds, savings account for 4k

LADYXXMACBETH

My 'savings' are slowly dwindling since I keep spending them because they are in my current account. I already have £3750.00 in premium bonds and feel like I should put my savings in an Isa, but would rather they were in premium bonds. Is there any reason why I shouldn't put them in premium bonds?
I've never had any saving before but the rates seem stupid low for isas and I don't really want the hassle of constantly changing banks just so I get an extra £2 a year.
I don't really care if it makes me any money I just want to have some money locked away so I can't spend it.

Phaelok

I am in a similar situation to you as I have some money in an ISA and in premium bonds.

As you know you do not gain any interest on premium bonds but are entered into a monthly draw. How much have you won since? Even though the interest rates are incredibly low, it is better to put money in an account that will pay a better rate of interest. You could look at fixed term ISA's so as not to tempt you to withdraw the money as you could be penalised up to 180 days interest.

I would see premium bonds as a last resort once you have maxed out your ISA's or put your money into a high interest paying account. The money you put in the premium bonds is interest you are happy to lose with a very small chance of winning...odds of 20,000 to 1 I believe?

LADYXXMACBETH

I don't like giving it to banks.

eskbanker

LADYXXMACBETH wrote: »

I don't like giving it to banks.

...but you feel happier giving it to the Treasury?!

Archi_Bald

or to inflation, by not caring how much interest your money gets?

Eco_Miser

£4k @ 5% = £200 gross, £160 net of 20% tax.

How much are you getting now?

£158 if your comment about an extra £2 is right.

TSB are offering this as a long term rate.

jimjames

LADYXXMACBETH wrote: »

I don't really care if it makes me any money I just want to have some money locked away so I can't spend it.

In that case premium bonds may be suitable.

For most people though, especially as this is a site about money saving, the best place is the one that gives the greatest return.

Premium bonds are not best for that and also not very easy to get money out and in. You could always have a different current account for your savings and cut up the debit card so you can't spend the money if that it your issue.

The difference between 1% and 5% on £4000 is fairly big at £40 vs £200. Link it to a Halifax account and you'll get £260.

Not many people would just give away £220 every year so why would you just throw that additional money away?

LADYXXMACBETH wrote: »

I don't like giving it to banks.

If you want it locked away and not with a bank then you may want to investigate S&S ISAs. Those are harder to get money out than a cash account and are designed for long term investments so may meet your criteria as long as you have emergency cash available too.