Buying Premium Bonds for Children? Read Our Guide First!

Want to gift your children something special on a special occasion? Wondering about buying premium bonds for children? Don’t know how much these Premium Bonds cost?

How much you can win? What are the pros and cons of buying premium bonds? And are they worth it? Read on to find all the answers to your queries on Premium Bonds. Let’s kick off with what premium bonds are!

What are Premium Bonds?

Premium Bonds are one of the UK’s greatest savings products, with a whopping £121 Billion held by 21 million people. These bonds are the best alternative to savings accounts, where you can put money and take it out when you want. However, you don’t earn any interest. Here are the basics of Premium Bonds that you need to know:

• These savings products are offered by National Savings and Investments (NS&I)- backed by the Treasury, so are 100% secure
• These bonds provide the chance to win monthly cash prizes between £25 to £1m
• These are regulated by the Financial Conduct Authority
• All the prizes of premium bonds are tax-free
• It is a safe way to invest your money

Here you buy £1 bonds and each one has an equal chance of winning (with a unique number), which means that the more you buy them, the more chances you get to win.

All the numbers of bonds are put in the monthly draw to declare the cash prizes winners at the start of each month. In this way, you get the chance to earn life-changing rewards.

How to Buy Premium Bonds?

These are easily accessible on the NS&I website. Here are the things you need to know before buying them:

• You can buy them for a minimum one-off amount of just £25
• The maximum amount of investment is £50,000
• You need to be over 16 to buy them, however, you can get them for your children as a parent or guardian
• You can buy them online, via phone bank transfer or through the post
• If you already have these bonds, you need to provide your Premium Bond holder’s number
• For the first-time buyers, NS&I will ask for your identity and address (as proof)

Every £1 of your bond is put into Electronic Random Number Indicator equipment (Erine) to draw winners. Rather than putting your money – with a low interest rate – in your savings accounts, investing in these bonds is a preferred risk to win big cash prizes.

Buying Premium Bonds for Children

Buying premium bonds for children can be a long-lasting gift. Before your child is 16, the parent or guardian needs to look after them (no matter who bought them). Parents or guardians of children under 16 will receive notification of the transactions, prizes, and payments for cashed-in bonds.

If you are buying for someone else’s child, you can apply the same procedure to buy. You’ll get an electronic paper gift card and acknowledgement of the investment (if asked).

However, the nominated parent or guardian will manage cash in the bonds. Before applying to someone else’s child you need to:

• Make sure that the parent or guardian is happy to manage the investment and provides you with the required detail that NS&I needs
• The identity and address will be checked by NS&I of everyone mentioned in the application (NS&I may ask for more documents)
• You must inform the parent or guardian of the child that NS&I might contact them for identity proof and documents

How Much You Can Win?

The monthly prize draw provides the winners with an amount of £25 to an impressive sum of £1m. The amount you could win is:

• £25
• £50
• £100
• £500
• £1,000
• £5,000
• £10,000
• £25,000
• £50,000
• £100,000
• £1,000,000

Every month two premium Bond Holders get the reward of £1m while six of them win £100,000. You have the choice to transfer the amount directly to the bank account or get it as a cheque via post.

Are Premium Bonds Worth Buying?

To get the answer, you need to understand your circumstances and financial situation. It also depends on your preferences about a prize draw instead of a conventional savings account.

Are they worth it? The £1m prize winners would say so. However, you need to consider its pros and cons to know are the bonds are worth buying.

Pros and Cons of Premium Bonds

Here are the benefits of investing in premium bonds:

• Your money is safe and protected
• There are chances to be a millionaire
• No investment risks
• They are tax-free
• You can reinvest
• Easily accessible
• A convenient option to auto-invest

Along with the pros, here are the drawbacks of Premium Bonds that you need to be aware of before buying them:

• You don’t earn any interest
• Its a gamble
• Inflation
• Better options available to get returns
• Delay in the prize draw

Quick Sum Up

There you have all the information about buying premium bonds for children, as it is a long-term gift for your children. And there are a lot of chances to win impressive cash prizes up to £1m. However, you need to know that it is like a gamble where you may earn nothing.

Still, you can put in a non-significant amount of money with the hope of earning big. If you know the ins and outs of Premium Bonds and consider it a good option, then it isn’t a bad idea to invest.

Disclaimer: This blog provides general information on Premium Bonds.