Types

• Bonds have been used for centuries now, and are a very popular means of investment. Although there are many different types, premium bonds have caught a lot of attention.
  
  

History

• Originally introduced in 1956 by Harold Mamillan as a means to lower inflation, premium bonds have steadily grown in popularity over the last half century.
  
  

Function

• Premium bonds work like a savings account, except the investor is rewarded with bonds relative to the amount of money invested instead of growing interest. These bonds will qualify the account holder for a wide variety of tax-free prizes every month.
  
  

Pros

• Premium bonds offer an exciting, different way to save money, and always provide the possibility of winning something big, worth far more than the original investment.
  
  

Cons

• Some downfalls include the very real possibility of not winning anything of substantial value, since a 2004 study revealed that the chances of winning a prize were at about 24,000-to-1. Additionally, the money invested does not at any point draw interest.