"There are two times in a man's life when he should not speculate: when he can't afford it, and when he can" - Mark Twain.

The Premium Bond scheme was started back in 1956, it turned out, when the government tried to encourage more people to save money for the future by operating what amounts to a risk-free lottery. When they were first offered, this system actually caused quite a bit of controversy, and they were even opposed by the Church's Committee, who rejected them because of the element of gambling involved. Most of you will be used to using savings accounts where interest is paid on the money you place into the account, usually annually, and you get whatever is left of the interest after the taxman has pocketed his share (unless you are lucky enough to be a registered non-taxpayer). However, Premium Bonds are a very different type of savings scheme, as they don't pay you interest. Instead, every £1 you invest in the scheme gets you a unique bond number that is entered each month into a prize draw where there are around a million prizes to be won, ranging in value from the top two prizes of £1 million to the smallest prizes of £50, all of which are awarded tax free. The numbers are drawn by the famous ERNIE (electronic random number indicator equipment), which randomly selects numbers to be compared to bonds. The sum given away each month is equivalent to the total interest that would otherwise be paid to all bond holders, and therefore varies according to the amount invested in bonds. The scheme is open to everyone aged over 16, although parents can buy Premium Bonds in the name of their children if they are younger, as happened in my case. When my parents bought the bonds for me back in 1979 the minimum investment was just £1, and the money they invested for me was (they tell me) a considerable investment into the scheme for the time, giving me multiple chances to win each month. Over time the irresistible force that is inflation has seen the minimum investment rise to where it currently stands at £100 (or £50 per month by standing order if you join the regular savers programme).

The big difference between Premium Bonds and games like the Lotto, though, is that with Premium Bonds your capital is safe; if you don't win one month, your bond numbers are kept and entered into every subsequent draw for as long as you own the bonds. This is why the scheme appeals to many people - it seems to offer a "safe" way of gambling, as you can't actually lose your stake. Obviously, the more money you invest in Premium Bonds, the greater your chance of winning one of the prizes, although there is a maximum investment limit of £30,000 per person. According to financial writer Jasmine Birtles in her book "A Bit on the Side", the odds of winning the £1 million jackpot if you have the maximum amount invested is 770,000 to 1, but you could expect an average of 12 prizes a year from this investment. She calculates this to be equivalent to a tax-free return of 2.15%, although the National Savings and Investments website cites the equivalent interest rate as 3.15% and independent financial advice website Motley Fool works it out at 3%.

Premium Bonds are undoubtedly popular and are probably fun if you ever manage to win something. They also claim to be the only investment option that is 100% safe as they are backed by the Treasury itself, so it is secure and reliable. If you like a gamble, then they are certainly a tempting opportunity and many people may find the idea of winning prizes to be more appealing than the thought of getting interest, especially as there is no payment to the taxman with a prize. I can see all these advantages, but it seems my family just don't have "average luck" and with both interest rates and the stock markets rising, I think my Premium Bond capital might just be better invested elsewhere. I just can't see a future for me and ERNIE, I'm afraid.