Giving financial gifts for Christmas could help towards a child’s adult life in the future, and there are a number of different options – such as putting cash in a high-paying children’s savings account, putting money into a pension pot or purchasing Premium Bonds from NS&I.
While the latter doesn’t guarantee returns each month, savers will be in with the chance of winning up to £1million tax-free.
For those who decide Premium Bonds are the top choice for them, there is an implication to consider, a personal finance expert has warned.
Alice Haine, personal finance analyst at DIY investment platform and coaching service Bestinvest, said: “Premium Bonds can be a winner but consider the implications of a child netting the top prize.”
NS&I has a Premium Bonds prize checker app for people to check if they have won
NS&I
She added: “Consider what happens if a child does win the top prize.
“If there is more than one child in the family, it might seem unfair if one child suddenly comes into money and the others don’t.
“Splitting winnings equally between all children may be an option to ensure everyone reaches adulthood with the same amount of money.”
Between December 2022 to November 2023, children won more than one million Premium Bonds prizes worth more than £72million, according to National Savings and Investments (NS&I).
Ms Haine said: “Many consider them a safe place to store children’s savings because they are 100% backed by HM Treasury.
“The interest received on the holding is decided by a monthly prize draw with the prize fund rate currently set at a very competitive 4.65 per cent.
This rate is still less than the top easy-access savings rates available right now plus it could be cut at any moment, and it is not a guaranteed return.
“The child needs to win a prize to make a return, with many not receiving any prizes at all over a 12-month period unlike bank interest which is guaranteed.”
NS&I lets parents and relatives buy Premium Bonds for children under 16
NS&I
A person can hold a minimum of £25 up to a maximum of £50,000 in Premium Bonds, whether they’re an adult or a child.
Parents and relatives can buy Premium Bonds for a child aged under 16.
Family members will need to let the parent or guardian of the child know before buying Premium Bonds, as they will be contacted by NS&I for evidence of identity and address.
Ms Haine warned: “Unless someone wins big, Premium Bonds savings will likely lose value in terms of purchasing power once you factor in inflation.”
