Premium bonds - are they worth it?

Hannah_M

I'm currently earning 1.5% on my savings (I have almost 20k) and I'm thinking about maybe investing some for higher returns. 2 problems: I have no idea how to invest, and not much time to devote to it.

My mother suggested premium bonds and I kind of like the idea because it is zero risk, and zero maintenance. But is it worth it? For now, I've bought £500 worth, which would have earned me £7.50 a year in interest in my account. So basically, if I win £25 even just once in the next 3 years, it's made it worth it. But overall, is it worth investing more, or are there other easy investments I could do? I don't mind a very small risk, I'd like decent returns

Some background info: no debt at the mo, I'm saving up for the capital to buy a house. Hopefully we'll be able to buy within the next 5-10 years - I'd love to sooner, and we're saving all we can towards it.

Linton

if you are looking at maximising returns you would almost certainly be better off making full use of high interest current accounts. The average return from premium bonds is 1.25% (decreasing soon to 1.15%) but because of the small number of large payouts your chance of winning nothing is very high with only £500.

See MSE's review here.

Hannah_M

I read MSE's review already, that's what gave me a clearer understanding of what premium bonds are - I'm a complete newbie at this sort of thing. I've almost maxed the 1.5% current account I have, but I want to do more. Should I go for a different current account instead? Do you think there's such a high chance I won't win anything over 3 years with £500?

Pixie5740

£500 invested for 3 years is statistically unlikely to win you anything.

http://www.moneysavingexpert.com/savings/premium-bonds-calculator/

SalarySlave

I had £2000 in premium bonds for 3 years, every month I was checking convinced it would be me that got a big prize. Total winnings: £0.00 Since then I have taken up switching bonuses and "high" interest accounts wherever I can find them and I have developed a real savings bug. I currently have accounts with 8 different places, and I just opened a 9th today. Takes a bit of work but I am just shy of £1000 interest a year

Jo_Blogs

For current accounts have a look here:

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest?&_ga=1.148204023.1744183518.1487582411#currentaccount

There are also current accounts which offer favorable regular saver rates:

http://www.moneysavingexpert.com/banking/compare-best-bank-accounts

Hannah_M

I see. Shame, I'd quite like a big win - who wouldn't?

I'll start looking into these current accounts then, thanks for all the advice everyone!

Rollinghome

Hannah_M wrote: »

I see. Shame, I'd quite like a big win - who wouldn't?

I'll start looking into these current accounts then, thanks for all the advice everyone!

If you want the best return on your savings then that's likely to be from high interest current account, unless you happen to be very lucky.

On the other hand you're forgoing just 62p of interest each month on your £500 that you could have got from that 1.5% account. If you enjoy the possibility of winning a million one day then that doesn't sound too extravagant to me. Especially as you'll get much of that back with a £25 prize about once every five years with average luck. So the net cost is about 21p a month. Certainly a much better bet than you'd get with the lottery or William Hill.

(I don't have any premium bonds having cashed in the five pounds worth I'd been given within a year at the age of 15.)

Kernel_Sanders

I hold a £2 premium bond bought decades ago! I'm not even sure if it gets entered in the draw as there is now a minimum holding, or the cost of each bond may have increased.

Hannah_M

Rollinghome wrote: »

If you want the best return on your savings then that's likely to be from high interest current account, unless you happen to be very lucky.

On the other hand you're forgoing just 62p of interest each month on your £500 that you could have got from that 1.5% account. If you enjoy the possibility of winning a million one day then that doesn't sound too extravagant to me. Especially as you'll get much of that back with a £25 prize about once every five years with average luck. So the net cost is about 21p a month. Certainly a much better bet than you'd get with the lottery or William Hill.

(I don't have any premium bonds having cashed in the five pounds worth I'd been given within a year at the age of 15.)

21p a month doesn't sound too bad, considering how much I could be spending playing the lottery. My mum once bought a lottery ticket and won £10, so she bought another one, didn't win, and realised the unlikelihood of ever winning anything worthwhile. She's never bought one since

I also like the fact that this money is 'out of sight out of mind', I won't see it in my accounts etc - almost like it isn't there for me to spend. I think I may just leave that 500 there but not add to it, we'll see. I'll let you all know when I win that million

oldfella

logically the chance of a big win with a large holding is astronomically small. The chance of a big win with a small holding is a little less than astronomically small. So hold the minimum.