Choosing a meaningful and lasting gift for a godchild can be both exciting and thoughtful. While toys and clothes are common, many godparents consider giving something more enduring such as Premium Bonds. These unique financial instruments offer the dual benefit of saving money for the child’s future while providing a chance to win tax-free prizes each month. Gifting Premium Bonds to a godchild is not just a monetary contribution, but a gesture that carries value, potential, and emotional significance. It’s a way to show your support and involvement in their life beyond traditional presents.
What Are Premium Bonds?
Understanding the Basics
Premium Bonds are a popular savings product issued by the UK’s National Savings and Investments (NS&I). Instead of earning regular interest, each £1 bond is entered into a monthly prize draw. The prizes range from £25 to a jackpot of £1 million, and all winnings are tax-free. The more bonds a person holds, the higher their chances of winning.
Are They Safe?
Yes, Premium Bonds are backed by the UK government, making them one of the safest ways to save money. You never lose the money you put in, and you can withdraw it at any time. This makes them an appealing option for cautious savers or for those gifting money to a child, such as a godchild.
Why Give Premium Bonds to a Godchild?
A Gift That Grows With Time
Premium Bonds are not like traditional presents. While toys may be forgotten or outgrown, bonds are a long-term gift that can last for years. They can grow with the child and serve as an introduction to financial responsibility and saving habits.
Fun and Exciting
One unique aspect of Premium Bonds is the excitement they bring. Unlike typical savings accounts, bonds come with the potential of winning monthly prizes. For a child, knowing that their money could result in a big win adds a fun element to saving.
Flexible and Accessible
Premium Bonds are easy to manage. They can be purchased online or by post and are accessible when needed. If your godchild needs the funds for education or other significant expenses later, the money is not locked away permanently.
Who Can Buy Premium Bonds for a Child?
Rules for Purchasing
If you are not the child’s parent or legal guardian, you cannot purchase Premium Bonds directly in the child’s name. However, you can still contribute by giving money to the child’s parent or guardian with the intention that it be used to buy bonds. The bonds will then be held in the child’s name under the control of the guardian until they reach 16 years old.
Legal Requirements
To buy Premium Bonds for a child:
- The child must be under 16 and reside in the UK.
- The parent or guardian will manage the account on their behalf.
- The minimum investment is £25.
- The maximum holding per individual is £50,000.
How to Contribute as a Godparent
As a godparent, you can either gift money directly to the child’s parents or give them a cheque or bank transfer labeled as a Premium Bonds gift. It’s helpful to provide a card or note explaining your intent so that the gift is meaningful and the money is used accordingly.
How to Manage and Track the Bonds
Monitoring Wins and Balances
Once Premium Bonds are in place, the child’s parent or guardian can use the NS&I online service or mobile app to track monthly prize draw results. Any winnings are either reinvested automatically or transferred to a bank account, depending on the preferences selected during setup.
Claiming Winnings
Since the bonds are in the child’s name, all winnings belong to them. If they win a large prize, NS&I may contact the parent or guardian to verify identity and confirm arrangements for receiving the funds.
Updating Details
If the family moves or changes contact details, they must notify NS&I to keep the account current. This ensures any notifications or prize winnings reach the correct recipient.
Premium Bonds vs. Other Gifts
Comparing Financial Gifts
When considering a financial gift for a godchild, you might look at several options, such as:
- Junior ISAs
- Children’s savings accounts
- Investment trusts
- Cash gifts
Premium Bonds stand out because they are government-backed, risk-free in terms of capital, and offer tax-free prize potential. While Junior ISAs may offer better long-term growth through interest or investment returns, they come with access restrictions and market risk. Premium Bonds, by contrast, offer flexibility and fun without exposure to loss.
Benefits of Premium Bonds
- No risk to initial capital
- Prizes are tax-free
- Funds can be withdrawn easily
- Monthly prize draws offer continued excitement
When to Give Premium Bonds
Special Occasions
Premium Bonds make perfect gifts for life milestones and celebrations. Consider them for:
- Christenings or naming ceremonies
- Birthdays
- Christmas and holidays
- First communion or confirmations
- Graduations
Long-Term Strategy
Rather than a one-time gift, some godparents choose to contribute annually or at key stages in the child’s life. Over time, this can accumulate into a meaningful fund for the child’s future needs, such as university, a first car, or travel.
Things to Keep in Mind
Limited Returns
While Premium Bonds are safe, they don’t earn regular interest. If the bonds do not win any prizes, the return is essentially zero. This makes them more suitable as a complement to other savings or investments rather than a sole financial plan.
Not Suitable for All Goals
If your godchild’s parents are focused on saving for specific goals with a fixed timeline, such as tuition fees, they may prefer guaranteed growth products. Premium Bonds are best used as a long-term, fun, and low-risk gift.
Gifting Premium Bonds to a godchild is a heartfelt and practical way to contribute to their financial future. It shows your love and support while teaching them the value of saving. Though not guaranteed to generate high returns, Premium Bonds are a secure, flexible, and thoughtful choice that combines financial wisdom with the thrill of potential prizes. Over the years, this kind of gift may not only grow in value but also in sentimental meaning, reflecting the special bond between a godparent and godchild.