Premium bonds were first issued in the fifties providing people with a new way to save. Since then, technological advances have meant National Savings and Investment have been able to consistently update and improve the service to continue offering an alternative savings option, unlike anything else available on the market. Premium bonds are accessible and easy to use, with the added incentive that you could win up to a million pounds in the monthly prize draw.
There is only one company that offers premium bonds: National Savings and Investment (NS&I). They were the founders of ERNIE, their Electronic Random Number Indicator Equipment, which they use to randomly draw bonds each month and allocate cash prizes to the people who choose to save this way.
One bond costs £1, but you need to buy at least 25 bonds to get started. After that, you can buy and sell as many bonds as you would like, up to the maximum of 50,000. The more bonds you buy, the more chance you have of winning a cash prize. There is no guarantee you will win anything, but as the minimum prize is £25, even if you win once in twelve months, you’ll have likely earned more from your savings than you would earn in interest from a standard savings account.
If you need to access the money you have saved in premium bonds, you simply log into your account and withdraw the money. There are no penalties for selling your premium bonds, and no transaction fees either, so you can buy and sell as many times as you need to keep up with your cashflow demands.
Any money you have saved in premium bonds is protected under the Financial Services Compensation Scheme (FSCS) too, so your money is never at risk by being invested in premium bonds.
Having savings means you don’t have to worry about how to get a loan online or whether you can afford emergency expenses. Savings can help make you feel secure in your ability to handle cashflow issues, ultimately improving your financial resilience which is something that may have taken a couple of knocks these last few years.
Premium bonds are an easy way to save because you only need a small amount of money to start investing. You don’t see the cash in your bank account every time you log onto your mobile banking, so there’s no temptation to spend it while you’re trying to be good. However, if you did suddenly need money fast, premium bonds can still be a viable savings option because you can access your money easily.
Often, the best way to save money is a way that works for your lifestyle and spending habits. If you’re very money conscious, you might find it easy to save just by leaving a certain amount of cash in your current account. If you find it hard to not spend money, then you’ll probably favour a more “out of sight, out of mind” approach, maybe transferring your cash into a locked savings account.
It’s important that however you save works for you, but once you get comfortable with your budget and putting money away each month, it might be time to consider how you can increase your savings without increasing your contributions. At the moment, interest rates on savings accounts are incredibly low, as they generally follow the base rate set by the Bank of England, which is only just starting to recover from an all-time low. It’s a good time to think about the alternative ways to save, such as premium bonds and cash ISAs.
Saving is vital for financial health. Even if you can only afford to save £20 a month, it might make all the difference when you come across an emergency expense. The more often you save, whether with or without premium bonds, the easier it will become to create lasting savings habits.
For more helpful information about how to manage your money, different financial products or what we do at Polar Credit, take a look at our Info Hub.