Why We Put Our Emergency Fund Into Premium Bonds

We have a small emergency fund that we’re currently sitting on for exactly that emergencies. When we’ve paid for our wedding next year we’ll 100% be adding more to it. But up until a month or two ago the month was just sitting in one of my Monzo pots doing absolutely nothing. It was earning nothing as my cash ISA’s are already being used for other purposes. And I didn’t want to add it to anything where it would be tied in or at risk. So that’s where the idea of getting premium bonds came from.

What are premium bonds?

NS&I Premium Bonds are a savings account you can put money into starting from as little as £25 up to £50,000. Instead of earning interest, the 1% interest that would be generated is used to fund a monthly prize draw. You get one ‘ticket’ to the draw for every £25 you put in, so the more you have the higher your chance of winning is.

Prizes range from two massive £1 million prizes down to £25. And your chances of winning are roughly 1 in 34,5000 which doesn’t sound like a lot, but it’s better odds than the lottery. And loads of people do that.

The important thing for us was that you can take out the money whenever you want. And you can do this easily through the app.

We all stand a chance of winning

Looking at the top winners for March someone with just £50 of bonds won the £50,000 prize money. It’s just luck of the game. Although imagine being that person to find out your money had gone up by 1000 times! And the two million pound winners had £2,000 in bonds for one, and £8,000 for the other.

So it isn’t always just those with the max 50K in bonds who win (although they do have a higher chance).

Why we chose to put our emergency fund in premium bonds

We choose to move our fund into premium bonds as we weren’t losing out on anything.

Interest rates are so low in standard accounts that it didn’t feel worthwhile opening one for the sake of a few pennies interest. By moving it into premium bonds we haven’t lost anything, but we have the chance of winning something. We’re not expecting to, but if we do that’s a bonus! And if you do win the prizes are tax-free which is even better.

You can also withdraw from your premium bonds really quickly. And even if we needed the money there and then without a single minutes wait we could borrow money from one of our sinking funds and then replace it when our premium bond money came through. I’m aware that we’re in a very fortunate position to have this backup and not everyone will have that.

Another reason I liked the idea of putting our emergency fund into premium bonds is having it out of my bank account. When the money was sat in a pot it was so easy to just take a little money out here and there for things we ‘needed’ that either we could have paid of another way, or didn’t genuinely need to begin with.

Buying premium bonds for children

Premium Bonds can be a great option to buy as a gift for kids under the age of 16. Until they hit 16 the parent or guardian named on the application is able to look after them.

The bonds are backed by the HM Treasury so the money you put in is 100% secure and there’s no way of losing money.

While investing the money may feel like a sounder and better option if saving for the long term it does come with risk.  But premium bonds are risk free. So it totally depends on your appetite for risk, how long they’ll be saved for and other factors for you to consider.

Do you have premium bonds?

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