Is Playing the Lottery a Wise Financial Decision?


In the game of lottery, people pay small amounts of money in exchange for a chance to win a large sum of money. This practice, which is sometimes referred to as gambling, has been used for centuries to raise funds for various purposes. Some states even have lotteries to supplement their budgets. While many people enjoy playing the lottery, others view it as a waste of money. The question of whether or not playing the lottery is a wise financial decision has been debated for years.

The basic elements of a lottery are simple: There must be some way to record the identities of bettors, the amount staked by each, and the number(s) or symbols on which the money is bet. This information is usually collected by a system of agents who pass the money raised by ticket sales up through the organization until it has been “banked.” Then, the organizers must determine the frequencies and sizes of prizes to be awarded. Some percentage of this pool is normally deducted as costs and profits, while the remainder becomes the prize money available to be won.

A drawing, or some other randomizing procedure, must then be used to select the winners. Traditionally, the process involved thoroughly mixing all of the tickets or counterfoils, then shuffling them and extracting the winning symbols by hand. But modern computers have replaced this labor-intensive method. They can store information about the tickets, generate random numbers, and perform all of these functions with greater speed and accuracy.

Although rich people play the lottery, they buy fewer tickets than the poor (except when jackpots approach ten figures). In fact, the average American earning fifty thousand dollars a year spends one per cent of his income on tickets; those making less than thirty thousand do so at thirteen times that rate. But the lottery has a powerful draw for people of all income levels.

During the nineteen-seventies and accelerating in the nineteen-eighties, America’s prosperity began to fade, as the gap between the rich and the poor widened, pensions and job security eroded, health-care costs rose, and inflation and unemployment continued to climb. At the same time, state government budgets grew out of control, and it became difficult for politicians to balance the books without raising taxes or cutting services, which were deeply unpopular with voters. This is when the lottery became a savior for many state governments. Its popularity has made it a valuable source of revenue for everything from infrastructure to education to addiction treatment programs. This has also enabled the government to reduce its dependence on the federal purse.