ISA vs. Premium Bonds: Which Actually Makes You Richer?

👋 Hey guys - Noah here,

My nan just told me she's got £20,000 sitting in Premium Bonds.

"It's safe money," she said. "Plus, I might win a million!"

I love my nan, but she's making the same mistake millions of Brits are making right now. And it's costing them thousands.

Today, I'm breaking down the REAL difference between ISAs and Premium Bonds and showing you exactly which one will actually make you richer.

The Premium Bonds Trap

Here's what nobody tells you about Premium Bonds:

Many people think the average return is 3.6% (as of now). Sounds decent, right?

Wrong.

That's the PRIZE FUND rate. Not what you'll actually get.

With £20,000 in Premium Bonds, statistically, you'll win about £720 per year. But most people win way less than the average.

Why? Because the big prizes skew the numbers.

Let's Do The Real Maths

Say you put £10,000 into Premium Bonds vs a Stocks & Shares ISA:

Premium Bonds after 10 years:

• Median return: about 3.6% annually (being generous)

• Your £10,000 becomes about £13,600

• Tax to pay: £0 (prizes are tax-free)

Stocks & Shares ISA after 10 years:

• Average FTSE 100 return: 7.5% annually

• Your £10,000 becomes: £20,610

• Tax to pay: £0 (ISAs are tax-free too!)

That's a £6,510 difference.

On £20,000? You're looking at over £13,000 less in your pocket.

"But Premium Bonds Are Safer!"

With Premium Bonds, you're GUARANTEED to lose money to inflation. If inflation reaches 4% and you're getting 3.5% returns, you're actually getting poorer every year.

With a diversified ISA (spread across many companies and index funds), you're protected against inflation over time. Yes, it goes up and down short-term. But over 10+ years, the stock market has never lost money.

The Psychology Trick The Government Doesn't Want You to Know

Premium Bonds feel exciting because of the monthly draw. It's basically a savings account dressed up as a lottery ticket.

But the excitement of maybe winning £25 costs people thousands in actual returns.

The government LOVE Premium Bonds because they get to use your money cheaply while you wait for prizes that statistically won't come.

So Which Should You Choose?

Choose Premium Bonds if:

• You need the money within 1-2 years

• You're saving for something specific soon

• You genuinely can't handle any risk

• You've maxed out your ISA allowance (£20k/year)

Choose an ISA if:

• You won't need the money for 5+ years

• You want to actually grow your wealth

• You understand that temporary dips don't matter long-term

• You want to retire before 70

Speaking of getting your finances sorted - if you want to see exactly where your money's going and find more cash to invest, I've been using Snoop to track all my spending. It literally found me £127 in subscriptions I forgot I was paying for. Mental.

You can check out Snoop for free here - it connects all your accounts and shows you exactly where to save money. Plus they've got switching deals that could net you hundreds.

Let me know what you're currently using - Premium Bonds or ISAs?

All the best, Noah