While Premium Bonds can be a safe and fun way to save for a child, the issue is, they don’t pay interest – and the odds of winning a big prize are quite slim.
There’s also the chance the bonds will earn nothing at all, meaning your son or daughter won’t get any return on their money.
Anna Bowes, from Savings Champion, said: “The key risk is you never win any prizes, and there are plenty of people for whom this is true.”
There are ways you can improve your chances.
Ms Bowes added: “Although each £1 bond has the same chance to win a prize – the odds are 21,000 to one – if you have many more £1 bonds to enter into the draw, the chance of winning something increases.”
That said, as you don’t get any interest, the money you’ve slotted away can quickly lose value if you don’t bag enough prizes to counter inflation.
Ms Suter said: “With inflation having been high that means the spending power of your cash will be eroded year on year. This is particularly the case if the bonds are held for a long time.”
Given that rates on standard savings accounts are now a lot higher than they were a year ago, you need to think carefully before ploughing too much money into Premium Bonds.
Ultimately, the decision as to whether or not to purchase Premium Bonds for a child is down to personal choice.
Ms Bowes said: “It’s best to assume you’ll never win one of the big prizes – and there’s always the possibility you won’t win anything at all. But you just never know, which is why the bonds remain so popular.”
The bottom line is that for some people, it’s still the thrill of what could happen which keeps them invested.