Are Premium Bonds a good Christmas gift for kids, or should parents spend their money elsewhere?

It may not top every child’s Christmas gift list, but many parents might be considering gifting savings to their children this year.

And at the top of that list are National Savings & Investments (NS&I) premium bonds, which are often given away.

But are these bonds worth buying as a financial gift for a child’s future, saving little and often, or would the guaranteed return from a savings account or Junior Isa prove a better investment?

Premium vouchers are a hit with parents and may be avoided by grandparents, due to the nature of the monthly prize draw, as well as the fact that they can be opened on behalf of children under 16 years of age.

More than 24 million people own Premium Bonds. Prizes range from £25 to £1 million, with winning numbers chosen by ERNIE, NS&I’s electronic random number generator.

We spoke to three savings experts to find out if buying premium bonds or other savings offers is the best idea this Christmas.

There are two of the coveted £1 million jackpots, which keep savers coming back every month.

Premium Bonds allow you to save a minimum of £25 and a maximum of £50,000.

It’s no secret that the more bonuses you have, the more chances you have of winning a prize. Every £1 invested in Premium Bonds gives you one entry into the Premium Bond prize draw.

Currently, the odds of any £1 bond winning a prize are 22,000 to one, and the Premium Bond prize pool rate (or average prize payout per year) sits at 4 per cent in the next month’s draw.

For that reason, unless you intend to deposit a large sum into premium bonds, approaching the maximum holding of £50,000, you are highly unlikely to win any significant prizes.

The average amount an NS&I customer has saved on premium bonds is £5,250.

James Blower, founder of the Savings Guru website, said: “Unless you contribute several thousand pounds, the chances of winning anything are small.” Someone with £1,000 saved in Premium Bonds and average luck will earn nothing in a given month.’

Andrew Hagger, founder of the MoneyComms website, said: “If you’re only going to invest a relatively small sum for them, say a couple of hundred pounds, the chances of winning anything are extremely low.”

As a result, Anna Bowes, founder of the Savings Champion website, said: “There may be better options for children, especially if they are taught the value of saving, rather than expecting to ‘get rich quick’ with a big profit.” . on Premium Bonds.’

While unlikely, it is not impossible that your child could win a prize with a small amount of Premium Bonds.

Nothing embodies this better than the winner of the 2004 £1 million jackpot from Newham in London, who won with just £17 in premium bonds they bought in February 1959.

But with the current odds of 22,000 to one, they would be very lucky to win anything.

If you are not the parent of the child you want to open Premium Bonds for, it will probably be easier to ask the parent to open the account.

In this way, it will be the father who will take care of the ties until the child turns 16 years old. At that time, the child will be able to take care of his own ties.

NS&I will also need to contact parents to provide proof of identity and address and all correspondence will be with them.

Once the account is open, you will be able to transfer money to purchase more bonds directly.

How else could you save money for the kids?

Like accounts for adults, there are a range of savings accounts available for children, from easy access accounts to tax-free Junior Isas that can’t be accessed until age 18.

Bowes said: ‘A junior Isa can provide a variable interest rate return from cash savings or a stock market investment return and, importantly, any return is tax-free for both the child and the parents, if the gift comes from them.

“It’s important to choose the right account that meets your children’s needs – the money in a Junior Isa cannot be accessed until age 18, although at this point it could be transferred to an adult Isa, including a Lifetime Isa if they are still available. Which could earn those savings a 25 percent bonus.

The best easy-access account for kids is one that pays up to 5 per cent: the HSBC MySavings account. This fee is only payable up to £3000; No interest is paid on anything over that amount.

There are also quite a few regular savings accounts that can be a good place to save money each month.

However, they should generally not be considered for cash that might be needed on a day-to-day basis, as there will usually be a penalty for early access or no access may be allowed until expiration.

The best is with Halifax. The Children’s Monthly Savings Account currently pays 5.5 per cent for 12 months and no withdrawals are allowed within the term.

You can save between £10 and £100 per month by ordering standing. This amount can be changed, but you cannot deposit more than £100 each month, even if you have paid less in a previous month.

Andrew Hagger said: “While the capital sum is safe in Premium Bonds, over time the value of the bonds will be eroded by inflation, so a better option is to consider paying money into a Junior Isa, through of the child’s parents.

“Currently, you can invest up to £9,000 tax-free a year and, with a Junior Cash Isa you can open online (with Tesco Bank and NS&I), you can earn 4 per cent interest – that’s a return higher than inflation today.’

It is worth checking with your local building society as some will pay more than this. Beverley Building Society pays 4.9 per cent, while Nottingham Building Society pays 4.75 per cent, but you need to live in the former’s catchment area or go to the latter’s branch.

James Blower replies: ‘My suggestion would be to gift through a Junior Isa. For young children, where there is a time horizon of at least five to ten years, stocks and shares are probably a good bet. For those who don’t want to take the risk, Coventry Building Society pays 4.5 per cent towards your Junior Cash Isa, which is open to everyone.’