Playing the lottery is a losing game yet millions of South Africans fritter money away each week, chancing their luck and risking a poorer retirement.
People would be shocked to discover not only the infinitesimal odds of winning the lottery but also just how large a nest egg they could accumulate by investing the money instead.
The chances of winning the lottery are 0,0000072% and the average payout per winner is R2,25-million. The chances of picking five correct balls and one correct bonus ball are only slightly better at 0,000429% with an average payout of R173 130.
If someone plays one ticket per draw from the age of 25 to 60, they are expected on average to lose R57 357 over that period.
If they had saved that money, they would have accumulated R103 507 over the same period.
Not playing will leave you R160 864,36 better off. It’s a no-brainer to save that money and build it up over time. The overwhelming odds are that playing the lottery is going to make you poorer.
In the above analysis it is assumed ticket prices stay stable at R3,50 per draw each Wednesday and Saturday, interest rates are at 10% and historical payouts are a good indication of future payouts.
If someone plays five tickets per draw twice a week between the ages of 25 and 60, they are expected to lose a whopping R286 785,96 over that period.
If they had saved that money, they would have accumulated R517 535,85, making them R804 321,81 richer than a person how had played.
People think that R3,50 is a relatively small amount so they aren’t too careful about spending it.
But add it up, and take into consideration the wealth accumulation effects of compounding returns, and it will build up to a very healthy lump sum.
If addition to not playing the lottery people saved the money they normally spend on little things like coffees, take-aways and even cocktails, it would make a life changing difference to their retirement.
Rob Rainier is Alexander Forbes’ Regional Head of Financial Planning Consulting for the Eastern Cape
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