Premium Bonds as Income?

Crashy_Time

Malthusian wrote: »

This is true but if your goal is to obtain a million pounds, a savings account is completely the wrong way to go about it, and the fact that one savings account has a slightly lower infinitesimal chance is lost in the noise.

It's like saying "I want to marry a beautiful multi-millionaire heiress, so I'm going to buy a can of Lynx because there's a better chance that a rich heiress will like Lynx than the smell of my unwashed armpits." The second part is true but it being true doesn't change the fact that the chance of achieving the goal is still indistinguishable from nil.

Technically you could obtain a million pounds from a bog-standard savings account if there was a bank error in your favour and you stole the money and successfully fled to Brazil and didn't have to pay it back. Or if you used the interest to buy lottery tickets. This infinitesimally small chance exists in the same universe as winning the Premium Bonds jackpot.

Both Premium Bonds' average interest and savings account interest are OK if your goal is to earn something over 1% per year. However if your goal is to get a million pounds then the problem with Premium Bonds is that they will cause you to fail, because you stop thinking about realistic options.

The point of Premium Bonds is to buy a fantasy and the reason Premium Bonds are bad value is that fantasies are free.

(They are not always bad value for higher rate taxpayers who need to hold a gigantic pile of easy-access cash.)

The views in the link are fantasy IMO, some people might do that but if you don`t play you can`t win, it is worth having some of your money in PB`s IMO, and then getting on with other investment ideas.

Crashy_Time

bearshare wrote: »

I think a main disadvantage of PBs is, as per OP, the return is treated as winnings rather than interest. So it is spent on 'treats' etc, rather than being re-invested. This means the real value of the capital is reducing at 2-3%, or whatever inflation is at the time.

You seldom hear of people spending their monthly savings interest on treats.

Depends on the person`s mindset, and the problem at the moment is deflation not inflation IMO.

Eco_Miser

bearshare wrote: »

You seldom hear of people spending their monthly savings interest on treats.

Well I don't put my interest/dividends into an account labelled 'treats' and try desperately to spend it all each month; but the fact that this income is surplus to my normal living costs (covered by pensions) means I can spend on treats whenever I feel like one, without worry or guilt.