The casting of lots for a prize has a long history, but lotteries as we know them grew up in the early modern era. The first public lotteries to offer tickets with prizes in the form of money were recorded in the Low Countries in the 15th century, when towns held them for town fortifications and to help the poor. The very poor, who spend a larger share of their income on lottery tickets than people in the middle or upper classes, have few other options for financial gain or social mobility, so they play the lottery because they believe it might be their last shot at wealth.
The big money comes in when enough people buy tickets. Each ticket costs a little bit of money, and the more tickets are sold, the bigger the jackpot. Players can choose their own numbers or opt for a quick pick, which will randomly select a set of numbers for them. Some people have very elaborate, quote-unquote systems to choose their numbers—like only buying tickets at certain stores or times of day—and others use a random number generator to make their selections. Regardless of what they do, most people understand that the odds of winning are long.
But many don’t realize that their purchases of lottery tickets are also a form of gambling. Lottery playing adds billions to government receipts each year, and those are dollars that could otherwise be invested in other things—like retirement savings or college tuition for kids. The risk-to-reward ratio may be slight, but if you’re constantly purchasing tickets and forgoing saving for other goals, it can add up.
A big part of the problem is the way state lotteries are advertised. They’re not promoted as a source of money for states that can be spent without increasing taxes. Instead, they’re advertised as a way to win a prize, and the idea is that it will change your life for the better.
That’s a pretty big claim to be making, especially when it’s targeted at the very poor—who are more likely than other lotto players to actually win the biggest prizes. And when the winner receives their prize—whether in the form of an annuity that pays out over 30 years or a lump sum—they’re often left wondering what to do with it.
It’s important to have a plan for any windfall, and if you’re the winner of a large lottery prize, it’s particularly crucial to work with an attorney, accountant, and financial planner. They can help you figure out a spending budget, decide how to invest your winnings, and weigh the pros and cons of the annuity and lump sum payout options. And, of course, they can help you stay safe from scammers who will be eager to take advantage of your newfound wealth. Keeping your name out of the news and telling only close friends is another important way to protect yourself. Good luck!