Feeling Lucky? Three reasons why playing the lottery is not a good investment

Lottery winners are a statistical anomaly. Despite this, Americans spent more money playing the lottery in 2018 than on books, video games, and tickets to live events combined. Your chances of winning the lottery are exceedingly remote, yet roughly 60% of Americans will spend upwards of $70 billion each year in the hopes of striking it rich. Nationwide, African Americans spend five times more on lottery tickets than Whites. A Duke University study estimates that African Americans spend about $1K, on average, per year on lottery tickets. Some will say, “so what? You’ve got to be in it to win it right?” Wrong! Here are three reasons why the lottery should not be seen as an investment strategy:

  • Over 50% of lottery tickets are purchased in low-income neighborhoods. Wealthy people don’t buy lottery tickets. In some states, the majority of lottery revenue comes from a limited percentage of primarily low-income players. A Pennsylvania study, for instance, determined that 29% of players accounted for 79% of lottery income and most of those people lived in communities at or below the median state income. Nationwide, people who earn less than $10K each year spend almost 6% of their income on lotto tickets. Many experts believe the the lottery is essentially a tax on the poor.

 

  • 20% of Americans believe the lottery is the only way to savings. Despite the terrible odds, many people, often those with the least cash to spare, believe the lottery is one of those “fun” things they can do as a way to get rich. In reality, experts indicate that investing the same $1K that African Americans would normally spend annually on a lottery ticket into an S&P 500 index fund could give over $1M at the end of 50 years, assuming they get a 10% return, which has historically been the market average. If you want to get rich, leave the lottery alone and invest for the long term. Learn about more ways to save and get cash faster here.

 

  • Most big winners, end up losing in life. Despite all the hoopla, MANY studies have shown that winning the lottery does not make you happier or healthier. Additionally, lottery winners are more likely to declare bankruptcy within 3 to 5 years of winning than the average American. Researchers who study lottery winners have found that many end up in worse financial situations than before they won. Jail convictions, robberies, drug overdoses, and bankruptcies have destroyed thousands of lottery winning families. Another struggle that many winners face is saying “no” to friends and family who hope to “share” the good fortune.

In short, don’t waste your money. The lottery is huge source of income for state governments, not the people who play. Instead of flushing that money down the toilet, invest it in yourself!

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