Image courtesy of Jean-Eyienne

There are many people that buy premium bonds and feel that they are really worth it. Obviously those people that have had good wins on the premium bonds really think that it is worthwhile but those that have not had any return will not agree. It is worth thinking hard about the advantages and disadvantages before buying them.

With premium bonds there is no guaranteed return. Your money is safe and you can draw it out with no notice and have it within a few days if not sooner. Each month there is a draw of every £1 bond that has been purchased and prizes are allocated. The odds of winning are small, but the more bonds that you have, the higher chance you have of winning. Prizes vary and they do change from time to time, with the top prize being a million pounds and the smallest twenty five pounds, with other amounts in between. The prizes are tax free.

If you examine the odds of winning, then you will see that the return can actually be small compared to a standard savings account. This means that if you want a regular return then you are better off not buying any. However, most people that buy premium bonds do so because they like the excitement of having a chance to win a big prize and therefore get a really good return on their money. It can be rather like having lottery tickets every month but you will get the money back if you do not win. Therefore, for people that enjoy gambling and buying lottery tickets, it can be a really good alternative. There is very little risk and chances of winning prizes. The only risk is that if you do not win anything or only very small amounts, your investment value will actually reduce due to inflation. This means that if you put the money in for ten years and win nothing, when you take it out, you will be able to buy far less with it than you would have been able to when you invested it.

It is worth taking a look at what prizes are on offer and what the odds are of winning. Consider whether you want to increase your odds by putting the maximum deposit into the account, if you can afford it, or whether you just want to try a bit. It can be worth also looking at past winners and how much they had invested as this information is available online, so you can see how much most winners have invested. This should help you to learn more about them and whether you think that having them will be the right thing for you to do.

So it is a risk and a gamble, but it can be fun, you can get your money back and it is safe. The prize values do change and this very much depends on the start of interest rates and the stock market so at the moment they are relatively low, but could go up in the future.