Martin Lewis gives warning to Brits with 'few hundred quid' in bank account

Martin Lewis has been warning Brits about something that millions of people have their money in which might not be helping them at all.

The Money Saving Expert was on This Morning earlier this week when he fielded a question about something called Premium Bonds and whether it was a worthwhile investment.

For those not in the know, Premium Bonds are an investment which over 24 million Brits have put money into.

While most investments pay out a dividend or some sort of regular interest, people putting their money into Premium Bonds instead go into a monthly prize draw where they can get prizes between £25 and £1 million tax free.

That sounds great, only most people investing will come away with nothing and Lewis has been warning Brits that their money could be better invested elsewhere.

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Answering the question of whether Premium Bonds were 'worth it', Lewis said it was 'quite complicated' and with a prize rate of 4.65 percent it didn't offer returns as good as many other investments.

While everyone wants to be the person who wins a million quid, you're far more likely to come away with nothing or prize amounts so small that a different investment would get you more.

He said: "If you have typical luck, which is based on the median average, you will earn less than 4.65%.

"Think about it this way, for every person that wins £1 million, a lot of people have to win nothing, which is why on average, with typical luck, you get less than 4.65%.

"The maximum is £50,000. So as a general rule of thumb, if you are a higher or top-rate taxpayer, you have enough savings that you pay interest on it, and you’re looking at putting a large amount in, they can be a pretty good bet.

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"If you’re looking at putting a few hundred quid in and you don’t pay tax on your savings, you would be a lot better off with a normal savings account where you’re guaranteed to get the interest."

So there you have it, if you're putting in 'a few hundred quid' then you'd be better off putting your money elsewhere.

On his site Lewis calculates that 24 million Brits have more than £121 billion invested in Premium Bonds and said that most people putting their money into it would be better off with a normal savings account.

To make Premium Bonds work you'd either need to put in a lot of money or be very, very lucky.