I was inspired to write this article following some recent publicity regarding the large increase in money invested in Prize Bonds towards the end of 2008. This article from Tina Leonard broaches the subject in the Irish Independent, but doesn’t really answer her own question.
The answer to the question really depends on why you’re saving and what you’re hoping to get from your Prize Bond investment. As the bonds pay no guaranteed return, then they’re not worth it if you’re trying to make some cash.
If you just have some money to set aside, and you want a little risk free gambling, then you could invest in Prize Bonds. The people behind the prize bonds say that you have a 4/1 chance of winning something in any one year – but that could be a prize as small as €75. So, if you’re putting large amounts of money into Prize Bonds, those odds and those potentially small prizes wouldn’t be worth it.
However, I do have some money in Prize Bonds, and have had for years. I probably haven’t made anything close to a decent interest rate of return on my investment, but that’s not my reason for investing.
I invest a small amount of money in prize bonds every month via direct debit because it’s a “locked away” form of saving – it’s money that I’ve put away that’s hard to get at and cash in.
So, if you need to make a return on your money, prize bonds aren’t worth it. But if you’re saving with some other purpose in mind, then as long as you don’t have too much money in there, it can’t do any harm.
On a more topical point, given recent deflationary months, holding money in prize bonds where there’s no guaranteed return isn’t as bad as during inflationary periods. At the moment, technically, putting your money away means it’s worth more because of deflation (you’d have bigger spending power) than during inflationary times where your spending power is less because of rising prices.