childrens bonus bonds vs interest savings accounts help?

fezza_2

Could do with your valued thoughts on this one. Family members have been buying units each year in nsi childrens bonus bonds for my daughter. After completing a review and sorting out my finances thought I would do a review for her.
I have opened a halifax regular saver for her and a save4it account on monday this week. At first I thought about cashing in her bonds and putting that money in the save for it account.

Halifax save4it 5.05% /annum
nsi 4.15& compound over 5 years (3.13% / annum + 8% bonus after 5 years)

With nsi acoount have a number of different bonds of different values and they are tax free until she is 21. If I cash in the bonds now and put in the savings account then she will probably end up paying tax earlier than if I kept them, but downside is they will be worth less than if I put them into higher interest savings.Have noticed that the nsi rate has dropped by 0.5% since we first started buying them.
Oh decisions decisions!
My thoughts now are cash in some and put in savings,and keep an eye on the nsi rate, and use the regular saver account at 10% for her for this years money from the family.
Any thoughts on this anyone?

jimclark1967

As is the case with most National Savings products the rate (after bonus) will be solid if unspectacular. This makes them ideal if you want to buy for a newborn baby and forget about them for 20 years (the bonds rather than the baby )

My parents bought be £1000 of childrens bonus bonds when I was about 10, presenting me with the certificates etc.. on my 18th birthday in 5 yrs ago. Once they had all matured and been cashed in I worked out the equivalent interest rate - it came out about 1% per year lower than if they'd been in the best instant access account available over the same time frame.

As you say, if your daughter starts paying tax before age 21 then things get interesting, though she'll be able to save tax free in ISAs by then so its probably not a huge issue.

Basically if you're prepared to monitor interest rates every 6 months or so then you're probably better off without the bonus bonds (though I must admit it was quite an exciting windfall at the time )

If you are going to cash the bonds in then it might be worth waiting until a 5 year anniversary comes up since you can then cash in without giving any notice and the bonus will just have been paid - up to you though.

JC

fezza_2

JC
I was trying to think too much yesterday about every possibility. Spose the thing to do is leave the bonds as they are and put money into a savings as well, eggs in one basket and all that!
Unfortunately the bonds will be no suprise for my daughter when she reaches 18 as she loves to look at what they are worth now lol. Trying to teach her from an early age about money saving on all fronts, haggling, budgeting, shopping around for best products rates etc.
Thanks for your thoughts though
fezza