The lure of the lottery. Who wouldn’t want to get rich quickly overnight? And isn’t spending $2 for a scratch-off ticket sort of like an investment in your future happiness?
Here’s the thing: Spending money on lottery tickets isn’t really investing your future at all. It’s more like gambling and your odds of coming out on top are pretty slim.
Let’s take a look:
Playing the Lottery vs Saving Money
If you buy one $5 ticket every week, you’re spending $260 annually. And whether it’s the Powerball or a state lottery, your chances of taking home any winnings aren’t very good. And your odds of winning don’t increase the longer you play. It’s just a matter of luck.
And so you’re out $260 by the end of the year. That might not seem like much, but over time, say 30 years, that’s $7,800. Plus, you’d be earning interest on that money over time.
If your savings account paid 1% interest over 30 years, you’d have $10,527.58. That’s not bad for having not bought a $2 lottery ticket each week.
Lottery vs investing
What if you took that $7,800 and invested it in a diversified portfolio of stocks, bonds, and funds? What would that look like over the course of 30 years?
While it’s impossible to predict the future, experts have predicted a long-term expected annual return for US large cap stocks (i.e., the S&P 500) of 5.9%.
Using an interest calculator, you can see that just by investing that $7,800 in the market, you could potentially have $43,548.52 in 30 years.
Ready to Quit Throwing Money Away on the Lottery?
When you play the lottery, you’re throwing that money into a vacuum. It doesn’t earn interest and it will never earn you dividends. You’re betting on a shot in the dark of a windfall.
Winning the lottery is a nice thing to dream about but it’s not a great way to plan for your future. Consider saving or investing that money and you may end up feeling lucky in the end after all.
Try investing with Stash Invest and putting that money to work for your future. We’ll even give you $5 toward your new portfolio by signing up here.