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1 Aug 2019

Premium bond winners August 2019: should you buy bonds for children?

Grandparents increasingly giving bonds as gifts

The latest premium bond winners have been announced, including two lucky savers who became overnight millionaires. The lure of winning big has made premium bonds the UK's most popular savings products - and grandparents are increasingly gifting bonds to the next generation.

Between August 2018 and July 2019, the number of premium bonds bought for children surged by more than 96,000, following a raft of changes to the gifting rules by the NS&I.

Find out who won in August 2019, as well as why more young people are being given bonds.

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Who won premium bonds in August 2019?

This month, the two million-pound jackpots were won by bondholders in Hertfordshire and the region of Cheshire West & Chester.

The man from Hertfordshire, who had £19,900 invested in bonds, had purchased his winning bond (number: 287NJ414708) in November 2016.

The other winner, a woman from Cheshire West & Chester, had to wait much longer for her stroke of luck. She purchased her winning bond (number: 105VW884980) in January 2006, more than 13 years ago.

High-value prize winners August 2019

While the jackpots tend to grab the most attention, NS&I also awarded more than 3.34m other prizes this month, worth a staggering £95bn.

In the August prize draw, NS&I gave out six prizes worth £100,000, as well as 10 worth £50,000 and 23 worth £25,000.

To find out if you've won, you can check via the NS&I website or on its app.

Alternatively, see the full list of high-value prize winners below:

Surge in gifting bonds to children

As children in the UK opened their birthday cards this year, a growing number would have found premium bonds instead of cash.

Around 261,000 people aged 16 or under were given premium bonds between August 2018 and June 2019, an increase of almost 60%. Of these lucky youngsters, one in three were treated by their grandparents.

This surge in generosity could be partly due to rule changes over the past year.

As of August 2018, the NS&I has allowed grandparents to buy premium bonds as gifts online, not just via post, making it a much easier process.

The NS&I also cut the minimum investment from £100 to £25 in February 2019, so that bonds are now a more budget-friendly option for families.

How to buy premium bonds for children

To buy premium bonds in a child's name, you currently need to be the parent, guardian or grandparent. At last year's Autumn Budget, plans were announced to allow other adults to buy bonds for children, including aunts, uncles, godparents or family friends, but these have not yet come into effect.

Grandparents can buy premium bonds as gifts by post or online, while parents also have the option to buy over the phone or to transfer from another NS&I account in the child's name.

No matter who buys the bonds, the investment will be managed by the child's parent or guardian until they turn 16. Keep in mind that parents will lose control over premium bonds once the child reaches 16 - so if you feel that this is too young for financial responsibility, you may need to consider a different type of investment.

The minimum amount you can buy is £25, and the maximum is £50,000.

Are premium bonds a good investment?

Buying premium bonds for your children is a way to secure them a nest egg - and if they win a tidy sum, it could set them up for life. Indeed, 10 people aged under 16 have become millionaires after winning the jackpot.

That said, your child won't earn regular interest on their savings. Instead, each month the bonds will be entered into a prize draw, with each £1 bond having an equal chance of winning.

The NS&I estimates that a person with average luck could earn a return of 1.4% over a year. There's no guarantee of this, however: while a lucky few will win much more, many will win less or nothing at all.

If you hold £10,000 or more in bonds, your probability of winning at least one prize in a 12-month period is upwards of 99.99% - although the prize could be as little as £25, which would equate to a return of just 0.25%.

Alternatives to premium bonds

If your child's money isn't earning interest at a rate that keeps pace with inflation, it could be losing value in real terms. Over the course of 16 years, this could have a significant impact. For example, goods that were worth £10,000 in 2003 would cost more than £15,000 in today's money.

To guarantee your child's returns, you could opt for a children's savings account instead.

The Nationwide Future Saver, for example, pays 3% AER (although you must have another Nationwide account; otherwise, it pays 2% AER). The interest compounds each year, meaning you earn interest on the interest itself, as well as the money you've paid in.

If you were to open the account with £5,000 when your child was born, and pay £50 per month into it, you'd have well over £22,700 to give as an 18th birthday gift if the rate remains at 3% (although it is variable).

Keep in mind, though, that you'll only be able to make one withdrawal per year. Any more, and your interest rate will drop to 0.5% under the current terms of the account.

Alternatively, you could opt for a Junior Isa. You'll be able to deposit up to £4,368 per year, and the money will be held in a tax-free wrapper.

One of the best rates currently available is from Coventry Building Society, which pays 3.6% AER. If you'd prefer to save with NS&I, it also offers a Junior Isa, paying a respectable 3.25%.

Parents and legal guardians can open Junior Isas for their children, and anyone can pay into one.

Note that with a Junior Isa, all the money is in the child's name and you cannot withdraw it. You can, however, transfer it between Isa providers. The child will gain access to it when they turn 18.