Lotteries are one of the largest industries in America. The little slips of paper they sell generate an estimated $45 billion annually. In comparison, Microsoft had gross sales of just over $44 billion in 2006. With about half of all American adults playing various state-run lotteries across the nation, it’s easy to see that there are big bucks in those little numbers. But behind every smiling face and billboard-sized check lie a number of myths and misperceptions about the lottery.
Myth 1: The more people play, the lower your odds in winning.
This is false. The odds in winning are fixed. Your odds in winning the MegaMillions Lottery jackpot are 1 in 135,145,920. The odds for winning the Powerball Lottery jackpot are 1 in 120, 526,770. While the odds are fixed, the more people who play a lottery does decrease your chances in become the sole winner of a lottery jackpot.
Myth 2: Buying two lottery tickets doubles your chances of winning.
Once again, this is false. If you buy one lottery ticket in the Powerball lottery, your chance of winning is 1 in 120,526,770. If you buy two tickets, your odds are 2 in 120,526,770. You have not doubled your chance at winning the lottery; you’ve just decreased the odds against you by an infinitesimal amount.
Myth 3: Lotteries are a great way to help education.
Tying lotteries into education was one of the greatest masterstrokes of marketing in history. In terms of return on investment, buying lottery tickets is an abysmal way to raise money for schools. Consider the case of the New Mexico educational lottery. Out of the 89.2 million dollars raised by the New Mexico lottery, less than half ($40.8 million) went to education.
If you’re spending a buck on a lottery ticket with the thought of benefiting education, you’re better off just giving 50 cents to your local school. It costs half as much as the lottery ticket, and the school gets more money.
Myth 4: It’s better to take the lump sum than annual payments.
It depends. Professional financial advisors have long maintained that you will actually do better in the long run taking the lower lump sum payment and investing this money. Conventional wisdom says that with wise investments, you’ll make more money than you would letting the lottery people hold onto your money and dole it out in yearly installments. However, with today’s investment market, this scenario is not as rosy as in years past.
Contrary to popular belief, if you chose annual payments and were to die before the payout ends, the government does not get the remaining payments. They can be part of your estate. There are some exceptions for very specific types of lotteries, but Powerball and Mega Millions winnings do not fall under those guidelines and can be inherited.
And the Winner Is…
The real lottery winners are the state governments that run them. Lotteries are popular ways to get people to give money to the government. As lottery proponents are quick to point out, lotteries are not taxes. After all, people are forced to pay taxes. No one is forced to pay the lottery. However, if that’s the only criteria for difference, then lotteries could be considered voluntary taxes.
Lotteries sell hope. Hope that these random numbers will provide the keys to wealth and happiness. I’m not against lotteries. People should have the right to spend their money as they please. And if a dollar’s worth of hope helps someone get by, I have no problem with that. However, I do believe in calling a spade a spade — and calling the lottery what it really is: a fun way for the government to get people to voluntarily give them money.
Sources: MSN, Wikipedia, New Mexico Lottery, Washington Post