Martin Lewis issues Premium Bonds warning to anyone who puts in just £1,000

Finance guru Martin Lewis has issued some sage advice to those considering purchasing Premium Bonds as gifts for kids, cautioning that they might not be the smart investment people think unless a sizable amount is being stashed away. He highlighted the all-too-common scenario where chucking in a grand annually tends to yield zero returns, potentially leaving gift-givers feeling disheartened.

Each month, Premium Bond owners are entered into a draw for prizes ranging from £25 to a whopping million - and it's all tax-free. But remember, it's those who invest hefty sums that generally have the upper hand when it comes to clinching top prizes.

You need to purchase a minimum of £25 in bonds to enter the prize draw, with the maximum investment limit capped at £50k. The more you invest, the more numbers you're allocated, increasing your chances of winning for every pound spent.

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Before you consider this option for a child's present, Martin Lewis recommends a serious ponder on the matter, questioning: "Why do so many people give children Premium Bonds? Premium Bonds are only a decent bet if you have a big whack in, say £10,000+, and you pay tax on savings interest. Most kids have/do neither. With £1,000 in over a year with typical (median average) luck you'll win nothing."

Money-saving guru Mr Lewis has reassured us that investing in premium bonds is one of the safest bets around due to their government guarantee. He elaborated: "Every penny you've got in there is backed up by the government. The only way you could have a problem is if the government went bust - then we'd all have bigger problems."

He further explained, "In other words, you're always at worst going to get your money back. Each individual bond goes into a prize draw and has a chance of winning an amount of money, from £25 up to a million pounds. And that's what dictates the interest that you get. So your interest is a gamble, but your money is totally safe."

He also dispelled the myth that newer Premium Bonds are luckier: "I often get asked, I've had my premium bonds a long time but haven't won anything, will I be better off buying new bonds because they seem to win more? Complete urban myth."

He clarified, "Every bond has the same chance of winning in the prize draw as every other bond. The reason more new bonds win is because there are more new bonds. When people bought these bonds in the 1960s and 1970s, they bought £1, £10, and £20. Now people are buying £500, £1,000, £10,000 worth."

"So, there are just simply more new bonds, so more new bonds win more often. That tends to just be a fiction as people in those areas have more premium bonds."