Saving bonds explained

If you’re wanting to increase your savings in a safe, low-risk manner – a savings bond might be ideal for you. Perfect for people that have money they’d like to invest, but don’t need access to it for some time.

How does a saving bond work?

A savings bond can have a set duration of your choice, usually between 6 months to 5 years and a fixed interest rate for the period. This is one of the main perks of a savings bond. As you have a fixed interest rate, you’ll have a good idea of how much money you’ll have once your time is up. Therefore, this is a great option if you have a specific goal or require a precise amount of money.

Usually, once you’ve agreed to your terms with the bank you can’t access your money until the arranged time is complete. If you do wish to withdraw your money before the remaining time is up, you might have to pay an additional charge. So, if you’re looking to invest money, but aren’t willing to wait – you could be better looking for another option.

Can I add money into my savings bond once I’ve opened it?

Unfortunately, you can’t add more money into your savings bond once it’s been agreed. So, you must make sure you’ve accepted the terms you’re happy with and invest the correct amount.

Types of saving bonds

There are two types of main savings bonds, a Fixed Rate Saving Bond and a Tracker Bond. A Fixed Rate Saving Bond is often the most popular for this type of investment. This is because the interest rate doesn’t fluctuate so you know where you stand before and after your investment. A Tracker Bond works slightly differently in that it tracks a specific rate of return to determine the gain on your investment. Arguably, this is a riskier move, but it might make you more money in the long run.

What happens when I’ve finished the duration of my savings bond?

Once you’ve finished the fixed term on your savings bond, you’ll have near-instant access to your money. From here, it’s your choice what you do with it. You might want to withdraw it and use it to fund a new venture or retirement. You could transfer the money into a run of the mill savings account with the same provider. Alternatively, you could reinvest the money into a new savings bond, agreeing on new terms and adding to your healthy investment.