Premium Bonds for children, where do we start, eh? Once you understand the basics of this government-run savings account, you will quickly work out if it’s a place you wish to invest your child’s future funds. Premium bonds were first introduced in 1956 and are now owned by around 21 million people in the UK! But, like all savings accounts and methods, it has its pros and cons.
So in order to break down this type of banking, and to help work out if it’s the right fit for you, we have listed some FAQs for premium bonds for children that will help answer your money worries and queries.
Premium Bonds for Children
What is a Premium Bond?
Premium Bonds are an investment product issued by National Savings & Investments (NS&I). They are a savings account you can put money into (and take out when you want), where the interest paid is decided by a monthly prize draw. You can win between £25 and the jackpot prize of £1 million tax-free.
Why Are Premium Bonds Good for Children?
An NS&I Premium Bond is a great method of saving money for your child and is a gift that will (fingers crossed) keep on giving. Any family member over 16 can buy premium bonds for a child (0-15). That’s right; aunts, uncles and even family friends can get involved to set up these funds!
How Do NS&I Premium Bonds Work?
When saving or investing with NS&I, you’re lending to the government but don’t worry, your money is totally secure. The government guarantees to buy back your bonds at the price you purchased them.
Different NS&I products might pay interest, stock market or inflation-linked returns (income) or, in the case of Premium Bonds, tax-free prizes/a prize fund.
Can You Lose Money in Premium Bonds?
You cannot lose your money in premium bonds as the NS&I is authorised and regulated by the Treasury, rather than a bank. As mentioned before, the government will pay you back the same amount of money you paid for/into the bond, therefore your money is 100% protected.
What Can You Win From the Premium Bonds Prize Draw?
You get a unique bond number for every to buy £1 invested. So if you save £100, you will get 100 bond numbers to enter into the prize draw. The idea is that the more bonds you buy the more chances you have to win! See a list of prizes and dates this year on the Money Expert website. You must not go over your £50,000 limit.
When Will My Child Receive Their Premium Bond?
Your child will receive their premium bond on their 16th birthday. Until then, the premium bond will be in the safe hands of mom & dad! Or you, nan, grandad, aunty, uncle…
How Many Premium Bonds Can You Buy for a Child?
You can have more than one guardian in charge of a child’s premium bond account but the child can only have up to £50,000 of premium bonds in total. If you invest over £50,000 in bonds in their name, will be cashed in and refunded — minus any prize money. If the prize money won is worth more than the extra bonds held, NS&I will ask for the cash back.
What is the Minimum Investment I Can Deposit for a Premium Bond?
The minimum purchase amount for bonds is £25.00 for one-off purchases and monthly standing orders.
Whereas, the maximum amount you can hold in your bonds is £50,000!
Do I Deposit My Premium Bond Funds into my Building Society?
NS&I bonds are a government-backed form of a savings account, so they are not a building society or affiliated with one. If you want to withdraw your money you will be selling some of your bonds. You can cash in your Premium Bonds at any time without penalty. If you’re registered with an online account, you can do it straight away.
Are Premium Bonds Worth It?
Premium bonds offer cash prizes which is all great stuff however, the chance of winning the top prize is very very slim. The drawback to having premium bonds is that you won’t earn regular income on your bonds.
Most people who buy premium bonds will earn only a small amount as a percentage of the money they contribute.
How Do I Invest My Premium Bonds and Set Up An Account?
You’ll need to complete an application form and send it to NS&I first. This is important as they need to witness your signature as proof of identity in order to set up an account.
Once they have this information & proof, you’ll be able to manage your accounts online (except for your Investment Account, which can only be managed by post). You can download an online form here.
How Do I Cash in My Bonds?
You can cash in your Premium Bonds at any time without penalty. If you’re registered with an online account, you can do it straightaway. Use this form from the official NS&I website here.
How Long Does it Take to Cash in Premium Bonds?
According to NS&I, it takes up to three banking days for the money to reach your account, unless you have elected to cash in after the next draw.
Now that the basics for premium bonds have been covered, and you have more of an idea of how they work, what are your thoughts? Do they suit your and your family? If you are looking for more family finance info please check out our latest money & finance blogs…
If you are looking for fun activities and tips & to try with the kids, feel free to check out our Tips & Hacks page! Whether you need a shortcut to the best offers in our membership blog, School Holiday info, the Best Online Games for Kids or need medical advice for ADHD in Children. We have a broad range of advice for you to pick from!