Building societies such as Nationwide and high street banks like NatWest have been offering bonds for years. The technical definition of a bond is essentially you give your money to an entity and they promise to pay it back with a fixed sum of interest because you are keeping your money with them.
Banks and companies issue bonds as a way of raising money for ventures within their organisation.
To a certain degree, bonds act as loans (in the same way that consumers use short term loans).
- Bank bonds are useful because they allow customers to save. In this economic climate that we live in, it is crucial for people to be able to save especially since we don’t know where the economy is headed. Bonds are a great choice for people who want to save as much money as they can as well as receiving a guaranteed rate of interest.
- They do pay some interest. While the interest rate may not be that high, bonds make you money and it is better to have a bond earning a bit of money than having your cash sitting in a regular account that does not earn any interest. At its most basic definition, interest is any money you pay extra on something. In this case, the bank pays interest to you for holding your money. If you took out no fax loans, you would then pay interest back to the lender.
- The rates of interest are so small; sometimes it is not worth saving your money in bonds.
- You have to lock away your cash for a set amount of time, and if your personal finance circumstances change, you may incur penalty charges for taking your money out. This can be difficult to accept especially when it is your money.
Clearly there are many ways you can save money if that is what you are seeking to do. Making use of bank bonds is one option available to you.
Saving may not be easy but by trying to save even a small amount each month you’ll be surprised how quickly you can build up at a least a good reserve to cover those unexpected expenses.
Ensure you choose the best savings account to suit your requirements and be clear whether or not you want to lock your money away in such as a bond for a period of time or another type of account which allows you regular access to your money.