Picture this. Your child turns 18, standing on the doorstep of adult life. You reveal the savings you’ve built for them. Is it a collection of Premium Bond wins, or a Junior ISA with layers of compound interest?
That is the real choice facing parents. Winning prizes in Junior Premium Bonds can sound exciting whereas Junior ISAs especially cash ones can sometimes sound less enticing. But which one actually works for your child’s future?
Let’s start with what Junior Premium Bonds are!
Premium Bonds are a government-backed scheme where your money is protected. Safe in this context means your original money cannot go down in value or be lost, because it is guaranteed by NS&I, a Treasury-backed bank. Unlike investing in the stock market, where values can rise and fall, every pound you put into Premium Bonds stays where it is.
Instead of earning interest, each pound is entered into a monthly prize draw with payouts ranging from £25 up to £1 million. Junior Premium Bonds work in the same way but are held in your child’s name and managed by you until they turn 16. At that point, legal responsibility for the account passes to them. This is worth thinking about, because it means they can take control of the money two years earlier than they would with a Junior Stocks & Shares ISA. For some teenagers that may feel too soon, and without guidance there is the risk they could spend the money before it serves its intended purpose.
The odds: excitement versus expectation
The official prize fund rate is around 3.60% variable as of September 2025, but that is an average figure across millions of savers. The real odds of winning are one in 21,000 per £1 bond, per month (source).
Let’s break that down:
- £1,000 invested might generate a single £36 prize over a year.
- £50,000, the maximum holding, might bring in £1,800 a year.
- Many children will win nothing at all.
NS&I themselves admit that most savers never win more than a couple of small prizes each year. Those million-pound winners you see in the headlines are the rare exceptions.
The inflation problem
Inflation in the UK is currently running at 3.8% (CPI) to 4.2% (CPIH) in the 12 months to July 2025, according to the Office for National Statistics. That means money that does not grow at a sufficient rate loses value each year.
For example, £1,000 loses about £38 of purchasing power over a year at 3.8 % inflation. Premium Bonds currently have a prize fund rate of about 3.6%, which still leaves you roughly £2 worse off in real terms after a year, and because winnings are never guaranteed, many savers will lose even more ground to inflation.
In other words, standing still with Premium Bonds can really mean moving backwards.
Junior ISAs: The predictable workhorse
Junior ISAs are tax-free accounts that allow you to put away up to £9,000 a year until your child turns 18. At that point, the account automatically becomes an adult ISA in their name. From then on, the money is fully theirs to control. This is often a sticking point for parents, who worry about their teenager spending years of careful savings on a car, a holiday, or something frivolous.
That concern is valid, which is why education is just as important as choosing the right savings vehicle. By the time your child turns 14 or 15, start involving them in conversations about money. Show them their account balance, explain how compound interest works, and talk about the goals the money could fund such as university, a first home, or a financial cushion as they step into adult life. Children who understand the purpose behind their savings are far more likely to respect and grow it, rather than treat it as a windfall.
There are two types of Junior ISA. Cash JISAs work like savings accounts and currently pay around 4% interest. That means they still outpace the Premium Bonds prize fund rate of 3.6 %, and unlike Premium Bonds the return can be guaranteed if it is a fixed interest rate. Stocks and Shares Junior ISAs let you invest in the stock market. Over the 20 years from 2003 to 2023, the FTSE 100 returned about 6.3% a year including dividends. However, past results may not predict future performance and your child’s investment could underperform or even decline in value depending on economic conditions and investment choices.
All three options are tax free: interest in a Cash JISA, growth in a Stocks and Shares JISA, and Premium Bond prizes.
Let us run the numbers. Saving £50 a month for 18 years would give you roughly:
- £15,000 in a Cash JISA earning 4% (source)
- £15,100 in Premium Bonds at the current prize fund rate of 3.6% (this is only an average, many savers will win less, and some may win more) (source);
- £21,000 in a Stocks and Shares JISA if UK markets returned around an average of 6 to 7% a year (source)
The returns for Premium Bonds and Cash JISAs look similar whereas the Stocks and Shares JISA has the potential to deliver much more over the same period (although investment returns are not guaranteed and past performance is not a guide to future performance).
The verdict
Junior Premium Bonds are a fine side pot if you like the thrill of opening a prize letter. They are safe, and they are fun for children to follow. But they are not a serious way to grow wealth. Junior Cash ISAs are a better way to make use of in periods of high interest rates.
While Junior Premium Bonds can be fun and offer the excitement of a potential win, a Junior Stocks & Shares ISA gives your child’s money the chance to grow over the long term through the stock market. Historically, global equity markets (for example, the MSCI World Index in GBP has delivered an average annualised return of about 8.5 % since 2001) have provided stronger long-term returns than cash or Premium Bonds – but it’s important to remember that investments can go down as well as up and returns are never guaranteed.
What to do next?
If you want to give your child a head start in adult life, a Junior ISA is the strongest option. A Cash JISA can give steady interest, while a Stocks and Shares JISA has the potential for higher growth over 18 years. Remember though, investments can go up and down, and past performance does not predict future returns.
Keep a small sum in Premium Bonds if you enjoy the lottery feel, but do not rely on them as your main savings plan for your child. The prize fund rate is only an average, winnings are never certain, and inflation can still eat away at the value of the money.
When your child turns 18, they will thank you for choosing a savings path that gave their money the best chance to grow, rather than leaving it to luck.
Investing puts your capital at risk. The value of investments can go down as well as up, and you may get back less than you put in. If you’re not sure whether an investment is right for you, it’s best to speak to a qualified financial adviser. Tax treatment is subject to individual circumstances and is liable to change.
Mia Wealth Limited (Mia Wealth) is an appointed representative of RiskSave Technologies Ltd, which is authorised and regulated by the Financial Conduct Authority (FRN 775330). Mia Wealth is a company registered in England and Wales (No. 15818371). Mia Wealth can be found on the Financial Conduct Authority Financial Services register under FRN 1033918. Our address is Fairbourne Drive, Atterbury Lakes, Milton Keynes, England, MK10 9R
