Martin Lewis has clarified a common misconception about when investing in NS&I’s Premium Bonds for children becomes worthwhile.
In a new social post, the Money Saving Expert founder explained that Premium Bonds only offer a reasonable return only under specific circumstances, such as having a substantial investment (around £10,000 or more) and being liable to pay tax on savings interest.
Most children, he pointed out, neither meet these criteria nor benefit meaningfully from small investments. Mr Lewis added that with £1,000 in Premium Bonds, the typical return over a year is likely to be “nothing”.
He wrote on X: “Why do so many people give children Premium Bonds? Premium Bonds are only a decent bet if you’ve a big whack in, say £10,000+ & you pay tax on savings interest.” (sic)
He added: “Most kids have/do neither. With £1,000 in over a year with typical (median average) luck you’ll win nothing.”
One user replied: “Completely disagree. We’ve had returns that easily outstrip interest rates. Maybe we’re just lucky.”
Standing his ground, Mr Lewis responded: “You were definitely statistically lucky.”
Premium Bonds, offered by National Savings and Investments (NS&I), remain a popular savings option, allowing individuals to invest up to £50,000.
Instead of earning interest, holders enter monthly prize draws with the chance to win tax-free cash prizes ranging from £25 to £1 million.
The annual prize fund rate for Premium Bonds in December was 4.15%, and the odds of any single £1 Bond number winning a prize are 22,000 to 1.
However, NS&I regularly emphasises that holding more Bonds increases the likelihood of winning.
Speaking previously on his BBC 5Live podcast, the Martin Lewis Podcast, the money guru said: “Most people should be looking at putting money in cash ISAs first because, with typical luck, you will win substantially more in a top one-year fix than you would in Premium Bonds and you’d see them win more in an easy access cash ISA.
“The thing about Premium Bonds is people live the dream in the hope that they’re going to be the person who wins the £1million and virtually nobody will – but that’s why it’s appealing.
“People always say things like ‘I win £25 every month’, and in my cynical head I go ‘yeah but if you put the same amount of money in the top cash ISA, you get a guaranteed win of £40 every month’.”
Mr Lewis added: “They’re not awful, I’m just about ‘what’s the best?’, and for me, they’re not the best.”
