As I was surfing through Yahoo! Finance last night, I spotted an article on the front page that disappointed me greatly. Right on the front page was a link to an article with the headline Powerball Jackpot Climbs To $75 Million!, including the exclamation point.
For those unaware, Powerball is a multi-state lottery in the United States in which players purchase a ticket that has a series of five numbers on it, plus a sixth “Powerball” number. Twice a week, winning numbers are drawn randomly and, if there are no players with an exact match, the winning amount rolls over to the next drawing. In essence, it’s a legalized form of gambling: the mathematical odds of hitting the jackpot and matching all six numbers is 1 in 146,107,962.
The appearance of such an article on a site that professes to be a center of information on how to appropriately manage your finances is a disappointment to say the least. Simply put, lotteries such as Powerball are an incredibly poor investment opportunity, no different than putting your money into a slot machine in a casino.
If you currently play Powerball (or any other lottery), I beg you to please put your money at least in a high-yield savings account, if not into a higher yield investment such as a mutual fund. Why? The average Powerball ticket loses $0.51 for every dollar invested.. Your “investment” in a ticket costs you $0.49, even figuring in your potential winnings.
Let’s use an example. Let’s say you buy $5 worth of Powerball tickets twice a week. That totals up to $520 a year. On average, you should win back $0.49 on every dollar spent, so at the end of the year out of that $520, you’ll have $254.80. On the other hand, putting that same $5 twice a week into a high-yield savings account will leave you with about $535 at the end of the year.
If you play the Lotto because it “lets you dream,” let’s see what that dream does for you over a longer time period. If you play Powerball for 20 years at that rate, you’ll wind up with about $5,000 in winnings. On the other hand, if you put that $5 twice a week into a HSBC savings account earning a 5.05% APY, you’ll have over $18,000. Which is more likely to help fulfill your dreams?
A big “wag of the finger” goes to Yahoo! Finance for this one. An article promoting the lottery does not belong on the front page of any site that professes to give financial advice.