Are Bonus Bonds Any Better than Lotto?

Are Bonus bonds better than buying Lotto tickets? Probably…

In a previous post, I tried to visualise the odds of winning the Lotto’s Powerball– and how it doesn’t really make sense to buy lotto tickets at all. The odds are so small that almost anything is more likely to happen than you winning Lotto.

And yet- I still purchase the odd Lotto ticket now and then- it’s interesting how illogical us humans can be.

Naturally- after my post, urging everyone not to buy Lotto tickets, I got some comments about bonus bonds- and why it makes more sense to buy those than Lotto. And there is some truth in that statement- your odds of winning the major prize in bonus bonds aren’t much better than lotto though.

What are Bonus Bonds?

Bonus Bonds market themselves as the “the much more fun investment”- but in reality- it’s not an investment– its a lottery. A lottery where your “return on investment” comes down to luck.

Each $1 bond is issued a bond number and has 1 chance in the monthly prize draw. Every dollar you invest gives you one ticket in the monthly draw.

But unlike Lotto- after the draw has finished- you get to keep your $1. And if you leave it in Bonus Bonds until the next draw, your bond will have the same chance of winning in that draw too. And this will continue until you withdraw you bonus bonds.

There is no charge transaction fee associated with “investing” or withdrawing your money from bonus bonds. But it’s not instantaneous- it takes a few days for transactions to be processed.

Some other facts about Bonus Bonds;

  • Minimum investment $20
  • Anyone can buy them-no matter age
  • prizes are paid in cash- or reinvested in Bonus Bonds
  • No tax on any prizes won
  • First started in 1970

How do Bonus Bonds Work?

Bonus Bond prize draws are held once a month, on the first business day of every month. The results are announced on the second Tuesday of each month on So it’s not as flashy as the twice-weekly Lotto draw. And there is never any media attention.

For you Bonus Bond to be eligible in the prize draw it has to have been in Bonus bonds for at least one calendar month. And from then on your Bonus Bond remains eligible to win prizes in every monthly draw until it is cashed-in.

The prize-winning Bonus Bonds are picked at random, and all eligible Bonus Bonds have an equal chance of winning. The first eligible Bonus Bond selected wins the first prize, the second eligible Bonus Bond selected wins the second prize, and so on, down to the last prize.

The number of prizes can vary month on month depending on the size of the prize pool- I guess that depends on the recent fund’s performance. They guarantee a minimum number of prizes each month including the 3 big prices of;

  • one prize of $1,000,000
  • one prize of $100,000
  • one prize of $50,000

The majority of the prizes are far lower- with a minimum of around 3,300 prizes of $20.

The Odds of Bonus Bonds

Bonus Bond claims that the odds of winning a prize is between 1 in 35,000 to 1 in 78,000. They cannot by law make the odds better than 1 in 9,600. As of 2019 there are $3.25 billion Bonus Bonds issued- and 98,230 prizes awarded- so the odds of winning a prize in 2019 was 1 in 32,296. But the vast majority of prizes are low value.

$1,000,0001 in 3,400,000,000
$100,0001 in 3,400,000,000
$50,0001 in 3,400,000,000
$5,0001 in 131,000,000
$5001 in 76,000,000
$1001 in 106,000,000
$501 in 1,250,000
$201 in 30,000
$0Nearly Guaranteed

Just like Lotto- you can increase your odds. The only way to increase your chances of winning is to just buy more bonus bonds. The more you hold, the more entries into the draw. But unlike Lotto- you get to keep your money after the draw.

If you had $1000 in Bonus Bonds- your odds of winning one of the big prizes is 1 in 3.25 million. Which means your odds are 10 times better than winning Powerball- but on par with being killed by a shark. To put it another way, you have a 0.00003% chance of winning a major prize, and a 99.99997% chance of winning nothing.

You Get to Keep you Money

I think this is where Bonus Bonds can help some people. If your the sort of person who is likely to buy several to many Lotto tickets a year- like me, then buying bonus bonds could work for you. Not only do you get the daydream about winning 1 million dollars- similar to buying a Lotto ticket- you get to keep your money.

That’s the one thing I think bonus bonds has going for it. It’s not an investment. Your money will lose value over time- but it’s better than buying a Lotto ticket.

There are $3.25 billion in the scheme, that’s around the price of Vodafone NZ which was sold for 3.4 Billion in May- If the fund earned just 2% that’s $64 Million. On average they have been paying out 3 Million a month- so $36 Million a year. So at 2% return, ANZ is pocketing 28 Million for running the scheme.

The size of the prize pool has also been decreasing over time. Down from 4 Million in 2017 to around 2.5 Million in 2019- with the number of winners down from 120,000 to 65,000 a month. ANZ insiders say that the prize pool has been coming down because the managing fee keeps rising. Watch Sam from Simplicity talk about bonus bonds.

Inflation will Eat at the Value of Your Bonus Bonds

The downside is that your money’s value will decrease as it sits in Bonus bonds- with the rate of inflation, which is currently sitting at around 1.5%, that meaning general goods and services cost 1.9% more today than they did this time last year- by an average of 1.5%.

The entire bonus bond fund, all $3.4 billion, actually has a positive annual return of around 1.5%. But as an individual- you can expect your returns to be negative taking into account inflation.

Investing in Bonus Bonds as an individual, unlike literally any other investment, doesn’t pay a guaranteed amount of interest. This means that as time passes inflation eats at your money, your money loses value in real terms. What you could buy for $1,000 last year would cost a lot more next year and so on. Most saving and term investments beat inflation or get close, but Bonus Bonds do not.

My Bonus Bond Experience

As I mentioned in my earlier post– I may have a gambling problem. I like to buy the occasional Lotto ticket. So years ago- I decided to buy Bonus bonds instead of Lotto tickets. This worked for me for several years- and as such, I have a small pot of Money sitting in bonus bonds- which I kind of treat as part of my Emergency fund. It’s not truly liquid cash, it will take me a day or two to access.

The idea was that every time I had the urge to buy a lotto ticket- I would just say to myself- I already have tickets into next months bonus bond draw. Or, I would buy some more Bonus Bonds.

Expect to see “This bondholding has not won any prizes in the last 12 months” every time you log on

I’ve held bonus bonds for many years. Even before 2011 in fact. I say 2011- as that was the first year I had access to the online platform, before that it was snail mail-based. Although, it wouldn’t have been too much earlier than 2011.

To date, I have won 4 prizes over 9 years.

  • February 2013
  • July 2016
  • March 2017
  • December 2017

It’s still exciting getting that email every time- but as you would expect- the prizes I had won were the $20 prizes.


So let’s look at what happened to my “investment” over time with inflation. If we assume inflation was an average of 2.5% over the period and that I had $2000 bonus bonds from day one, what would the value of my Bonus Bonds be in real terms?

YearBond Value in Real termsPrizes Won

So- over the last 9 years my lose in real terms is $293– which makes it a bad investment. If I had it in the bank earning only 1.5% after-tax- I would be up by $250.


So as you can see- bonus bonds is not a great investment. In fact- I struggle to even think of buying bonus bonds as an investment. But- if like me- bonus bonds can psychologically get you to stop buying lotto tickets- then it might help in the long term. My $293 real loss is equivalent to 24 Lotto Powerball tickets over 9 years- or about 3 tickets a year. So if I buy 3 fewer tickets a year- I’m calling that a win.

Now I know I’ll get some feedback about why buying lotto tickets and Bonus Bonds is illogical. How could I be doing that? Well- we humans don’t always behave rationally. And I’m no different- so be nice!

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1 thought on “Are Bonus Bonds Any Better than Lotto?”

  1. I’ve always thought it makes sense to at least have the minimum in Bonus Bonds. If you put $20, you’re not missing out on too much at an average rate of compounding over 30 years. You might be down a couple hundred bucks when you reach 65. But for that $20, you could (probably not, but maybe) win a million bucks! Seems silly not to at least be in the draw.


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