Santander 123 v Premium Bonds

Therese1

I am currently “funemployed” and am planning to do freelance work once I work out what type I want to do.

In the meantime I have been living off the last few months wages that I eeked out as far as possible even before I left.

I am now about to start hitting my savings....but would like to know which are ‘best’ to spend first. I am a saver by nature so I have no doubt this will kick me back to earning fairly soon -but at least I will be in control rather than at the mercy of a toxic corporate environment.

So, do I transfer a monthly amount to my 123 account from my premium bonds or do I just work straight from the bank? I have the maximum £20k in the 123 and I do the £500 out/in to earn the interest each month?

eskbanker

It's a judgement call - withdrawing directly from a 123 balance is definitely forgoing 1.5% AER of known interest, whereas cashing in premium bonds is theoretically worth about 1.2% annually on average, but of course your mileage may vary! What's your typical rate of return on your PBs?

Therese1

Thank you.

I have £35k in PB and since May last year won a total of £550. I reinvest the winnings automatically.

tacpot12

So you are receiving about 1.5% from PB, so there isn't much to chose between the two. You could always take a bit from both each month.

I your position I would set a 'floor' for my savings below which I would start job hunting. I would suggest this floor is set high enough that even if it takes you a couple of months to find a job, your savings do not dwindle away to zero. I had a period of unemployment where I started job hunting in May, found a job in June, but the employer took nearly two months to complete their checks and references, so by the time I received my first pay it was the end of August, so over three months.

Zero_Sum

I wouldnt bother with full fat 123 either. Once you factor in the fees, its not a great return & theres plenty of savings accounts that offer a better return.

letitbe90

Zero_Sum wrote: »

I wouldnt bother with full fat 123 either. Once you factor in the fees, its not a great return & theres plenty of savings accounts that offer a better return.

Not really, especially when you factor in the cashback potential in addition to the 1.5%.

Zero_Sum

letitbe90 wrote: »

Not really, especially when you factor in the cashback potential in addition to the 1.5%.

But you get that on the lite version which is £4 pcm less. So it really is a poor option

capital0ne

Zero_Sum wrote: »

I wouldnt bother with full fat 123 either. Once you factor in the fees, its not a great return & theres plenty of savings accounts that offer a better return.

Approx £23 per month for me, after fees

Zero_Sum

capital0ne wrote: »

Approx £23 per month for me, after fees

And if i was in your situation i'd be getting £27 a month