Going to get a small windfall. What to do?

[ImSweatingBalls]

My parents have recently helped my sibling out financially, not a huge amount. They've told me in a few months they will also gift me some money. DH and I are saving for our first home, money is allocated to savings each month.

So the question is, would you save it all or save a portion of it?

It will probably be in the region of 3 or 4k I would say. So a nice surprise, but not life changing.

We are probably half way towards a deposit at the moment, planning to live in Greater London/SE.

Save the lot!

premium bonds. you can cash in whenever you need the money.

@Diegofrompennyburn Have you won much on premium bonds? I'm right in thinking that you don't lose money like you might with stocks and shares, aren't I?

You don't lose your money, your investment stays there.

I had a few hundred invested for years, won nowt. Put £15k in earlier this year, and have won back £150 so far. So a rate of just under 1%, but it is totally risk free.

@Diegofrompennyburn Premium bonds might be the way to go then. Thank you! 😊

Do you have a Lisa?

Have a look at Martin Lewis' Money Saving Expert site for accounts with good rates of interest. He says NOT to invest in premium bonds as the chances of winning any money is minimal and you can get better rates of interest in a savings account.

Are you a first time buyer? If you are use a money box ISA. Put in £4k which is the limit and the government top up with an extra £1k as long as you use it for buying your first home. Better interest than anything else

@Ana86 I don't have a LISA but I have a help to buy ISA as does DH which we each put £200 per month into.

@RamsayBoltonsConscience I'll take a look, thank you.

@katieg03 we are both first time buyers, but as I have the Help to buy ISA, I won't get the top up with both. Although I would get the interest from the LISA if I opened one.

With £3-4k I wouldn't do premium bonds. There is a 1 in 24,500 chance of winning a prize, so with less than £25k in there you're unlikely to win each month.

Premium bonds are only worth it if you have more than about 30k to invest because the the probability will More or less guarantee you the interest rate. Less than that just open the best savings account you can find.

I'm no expert but if I were in your shoes I'd look to invest the cash in something that has the potential to increase in value rather than just stick it in a savings account, given where inflation is heading

I think that’s poor advice @FuncaMunca given we’re on the precipice of a global depression and the money is for a house deposit. The OP could easily invest and the money shrink by 20-30% at the point she needs the money. Especially as houses may deflate 5-15%.
OP if it’s for a house I would go ultra low risk.

Another premium bonds saver here , I’ve achieved 6.5% in two years - better than any savings acct and almost instant access

I'm going against the grain here but I think if it's a windfall that you were not expecting, I would spend it on a treat e.g. a holiday.

Use enough for a lovely day out and a meal, so if there's no kids, maybe £150. Save the rest.

It wasn't advice

Put it towards you deposit, it’s going to still be a chunk. Do not invest this amount punt for a small period of time.

Hi premium bonds work a little bit like interest rates.

the NS&I bank set an interest rate say of 1.2% (not sure what they’re using right now). They then apply that to the number of bonds held by people. £1 invested is one bond and one chance of winning. There are around 21 million bonds. So £21m pounds which they apply 1.2% to. This equates to the total prize money per month. They then decide how many £1m winners (I think 3 each month) and then the rest of the prizes. There are a lot of £25 win chances for instance- 1000s

so the theory is with “average” luck you’ll get back prizes over the year equivalent to 1.2%.

but here’s the thing…the more you invest the more chances you have. So if you invest £25 (which I think is minimum) you have 25 in 21 million chance of winning a big prize (well actually slightly better if there are 3million pundits prizes), but if you have invested the maximum £40000 you have 40,000 chances in 21 million. So the more bonds you hold the more chance 1 of your bonds will hit a prize each month.

I track the equivalent interest rate I earn with my winning each year. I am pretty spot on average luck in terms of hitting that “interest rate”. But it is almost entirely made up of £25 prizes - some months I get one prize, some months I might get 3 prizes, etc. ok, I may win a bigger prize one day- but the odds even with a hefty amount invested are against me

it is all tax free so that’s why I use it. I could get better interest rate elsewhere but I’d pay tax on it. I could put it into a cash ISA - that’d be tax free but interest rates in cash ISAs have been lower than premium bond equivalent for last few years. I also use my ISAs for stocks and share investments. But I am pensioner and at my limit for tax free interest allowance.

If you’re not and well below that allowance, put it into easy access cash and chase down interest rates by moving it often as they are rising literally each month currently. Don’t be loyal to a single bank- move to highest rates frequently. However, if you are savings longer term then only way to try and beat inflation just now is stocks and shares. But you need to be prepared to invest 7-10years.

you can, unlike stokes and share, buy and sell premium bonds easily without cost. But be aware you’ll only be entered for the draw once you’ve had your money invested for a full calander month . So buy as close as possible to the end of the proceeding month. If you buy bonds say on the 3rd of the month it’ll be nearly 8 weeks before you are entered into the draw.

Chase account 1.5% AER so £3k would get £45 a year interest. Or pop it in premium bonds for chance of winning more.

Thank you all.

I think I'm going to save the majority and take a small amount out of it for a day out/treat. I'll look around to see what the best rate I can get at the time.

❤