Premium Bonds for Short Term Savings?

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We're looking to get a mortgage at the end of the year (around November time), so have the deposit money for that floating around in various accounts until we need it.


Considering we won't be opening any savings accounts for a full year, so won't receive any interest from the usual accounts. Similarly, any accounts that pay monthly interest would be giving us so little money in interest anyway, it's barely worth the trouble.


We've already got HTB ISAs, and was just wondering if Premium Bonds might be a decent 'investment' for £10-20k? Or if there was something I was missing.


I understand that we'd likely win nothing so, would have less money than if we saved it properly. However, the money we would earn from savings interest is so little, I'd rather take the gamble at the chance of earning more.


Any thoughts?
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  • CLAPTON
    CLAPTON Posts: 41,865 Forumite
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    tain wrote: »
    We're looking to get a mortgage at the end of the year (around November time), so have the deposit money for that floating around in various accounts until we need it.


    Considering we won't be opening any savings accounts for a full year, so won't receive any interest from the usual accounts. Similarly, any accounts that pay monthly interest would be giving us so little money in interest anyway, it's barely worth the trouble.


    We've already got HTB ISAs, and was just wondering if Premium Bonds might be a decent 'investment' for £10-20k? Or if there was something I was missing.


    I understand that we'd likely win nothing so, would have less money than if we saved it properly. However, the money we would earn from savings interest is so little, I'd rather take the gamble at the chance of earning more.


    Any thoughts?

    'normal' saving accounts that pay annual interest do in fact pay out if you close the a/c early (unless they are specific 'term' account)
  • psychic_teabag
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    £10k at 1% interest is earning about 27p per day. You could put that towards lottery tickets if you like to gamble.

    An added problem with short-term premium bonds is that they don't go into the draw until the second month after purchase. (If you buy today or tomorrow they would make it into the May draw. Otherwise not until the June draw.)
  • tain
    tain Posts: 711 Forumite
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    I understand everything that has been mentioned.


    It's more the payoff of potentially 'winning' bigger than the tiny amount that the interest earns. It really is tiny, and would do little to help our mortgage, so I'm far more drawn to gambling.


    I just wanted to make sure I wasn't missing a product or caveat that might change things.
  • ColdIron
    ColdIron Posts: 9,155 Forumite
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    Have a look at the PB Calculator
    http://www.moneysavingexpert.com/savings/premium-bonds-calculator/

    Bear in mind that NS&I are cutting the payouts on PBs and the calculator may not take that into account yet, also take a month off for the reason psychic teabag mentions
    http://www.thisismoney.co.uk/money/saving/article-3513645/NS-hacks-rates-axes-number-Premium-Bond-prizes-300-000-month.html

    You could get more than 2 or 3 £25 wins but you probably won't

    A Santander 123 will earn £400 on £20K for 8 months, possibly untaxed, minus the £5 monthly fee plus whatever you can get with utility cashback
  • PeacefulWaters
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    I'd do Santander 123 for £20k and buy lottery tickets with the interest.
  • sharpharp
    sharpharp Posts: 167 Forumite
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    £10k at 1% interest is earning about 27p per day. You could put that towards lottery tickets if you like to gamble.

    An added problem with short-term premium bonds is that they don't go into the draw until the second month after purchase. (If you buy today or tomorrow they would make it into the May draw. Otherwise not until the June draw.)


    and don't forget, the odds of winning on the Premium Bonds is being heavily reduced in June...
  • tain
    tain Posts: 711 Forumite
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    ColdIron wrote: »
    A Santander 123 will earn £400 on £20K for 8 months, possibly untaxed, minus the £5 monthly fee plus whatever you can get with utility cashback



    Is that even with early exit?? If so, that's more interesting.
  • psychic_teabag
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    Santander 123 is "just" a bank current account, so yes it's instant-access. But it would be a hit on your credit file - is that a bad thing on runup to a mortgage application ?

    And it expects a monthly deposit (just withdraw and re-deposit) and a couple of monthly direct debits - one of those is required to get the interest and the other to get the cashback but I can't remember which way round they go. Well, I guess 2DD to get interest, since obviously you also need DD's to get cashback in the first place. It is quite a bit to set up for short-term savings - it might not be the most suitable current account after you've spent the 20k.
  • ColdIron
    ColdIron Posts: 9,155 Forumite
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    edited 30 March 2016 at 12:39PM
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    tain wrote: »
    Is that even with early exit?? If so, that's more interesting.
    Interest is calculated daily so as long as it's not a fixed term account you will get the balance when you close the account even with an easy access savings account that usually pays annually
    and a couple of monthly direct debits - one of those is required to get the interest and the other to get the cashback but I can't remember which way round they go
    2 DDs. To qualify for interest you need:

    1) A minimum balance (3K if you want 3%)
    2) Monthly deposit of £500, transfer out and back in, same day with Standing Oders is fine
    3) 2 Active DDs, they don't have to pay out every month. Qualifying DDs will earn cashback
    4) There is a £5 monthly fee but this can be covered by the cashback

    As it's a current account Santander will do a credit check but the footmark it leaves is quite light, it's much the same as if you sign up for a mobile phone contract

    It's pretty easy to set up, maybe an hour or two, it's up to you to decide what the effort/return trade-off is worth to you

    You might even like it so much you keep it after you get your mortgage but there are better accounts for lower balances

    Just a suggestion. As they say, up to you

    Edit
    For clarity, when I say 'Interest is calculated daily etc ...' this is generic and applies to most non-fixed term accounts, e.g. easy access savings and currents accounts. The Santander 123 is a current account that pays monthly but you may not want to rule out other savings accounts that pay annually though they will usually have lower interest rates
  • Dan83
    Dan83 Posts: 672 Forumite
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    As said above, the money has to be in the account for a full calander month before its entered into a draw, or it did when I bought some.

    If the money is just sitting round doing nothing and you can't be bothered opening a series of accounts, them premium bonds arnt a bad idea.
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