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The Name’s Bond - Savings Bond 00

What do you think of when someone says “Bond”???? Ian Fleming’s famous secret agent with all his gadgets?? There are other types of Bonds that are certainly not as cool as James.

So, how does it all work...???

In the financial world, companies sell bonds to raise money. In return they pay interest to people who buy the bonds. Unlike buying shares in a company, the owner of bonds do not own part of the company. The company merely owes the bond ‘holder’ money which it has to pay back at a set date in the future.

Why don’t these companies borrow from banks? Well, some do. But in the case of really big companies, the banks might not want to lend them as much as they want. It can also be cheaper to issue bonds: the companies can decide what the interest rate will be and how long it will be before they have to pay it back.

Government Bonds

Even governments issue bonds. So, while the Foreign Office uses James Bond to catch all the baddies, the Treasury issues financial bonds to borrow money. Government bonds, also called Gilts, are seen as the safest investment. Although companies, no matter how big or small, can go bankrupt, it is highly unlikely that the British Government will!

There are lots of other types of bonds. Some have really cool names, like Sushi Bonds and Yankee Bonds; others have rubbish names, like Junk Bonds.

You can even buy a bond yourself. You can’t have a Sushi Bond or a Junk Bond (who’d want something called that anyway???), but you can have a Premium Bond or a Children’s Bonus Bond. These are also sold by the government to help people save money, but they usually have to be bought for you by one of your relatives.

The Children’s Bonus Bond is like the other bonds, with a set interest rate lasting for five years. But the Premium Bond is a cross between the National Lottery and a savings account. Each bond is worth £1 and has a unique number. You can have up to 30,000 of them and every month a computer called Ernie draws a number out and a lucky winner gets £1m!!! It’s better than the lottery because even if you don’t win you still keep your £1 bond and it goes into every draw in the future.

So which of James Bond’s cool gadgets would you buy first if you had £1m???

Dominic Dudley
Dominic is a Business Editor at New Media Age

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