Imagine if the Governor of your state came up with the following proposal:
In order to solve the state's money problems, he was going to create a new tax. This tax would be only on the poor and the middle class.
Sounds silly, right? He'd get laughed out of the Governor's mansion.
Well, fact is, governors crank out a "reverse tax" like this all the time, and people love it. They clamor for more. They line up to pay it.
Because when you think about it, that's what the lottery really is. A tax on people who don't have any money but want some.
I could quote you odds and percentages on this one, but do I really need to?
The fact is, the government is waving a carrot in front of you--really, in front of you and all your neighbors--and saying that if you all hop and jump and dance for them, one of you will get the carrot.
What's worse, they're doing this while there are plenty of carrot patches all over the place.
Of course, if you think about how interest works, and how your own money can work for you, growing to make more and more dollars, it's more like the government is asking you for carrot seeds in exchange for carrots. If you would just go plant the seed, tend it and take care of it, soon enough you'd have all the carrots you would want.
Same thing with your money.
The current ad campaign for California's Super Lotto plus brags, "Why not take a risk where the upside is millions and the downside is only a buck?"
In truth, the average lottery player plays $30 a month. That's about a buck a day, seven tickets a week.
If the same person invested just that $30 a month in a Roth IRA starting at age 21--$360 a year--at 12% interest they would have half a million dollars waiting for them at retirement.
If they started when they were 18, they'd have $770,000. Over three quarters of a million dollars.
And if you hope to become a millionaire, start at 18 and pop $40 a month into the IRA instead of at the Lotto counter. By retirement, at 12% a year, a millionaire you will be.
I realize, however, that you aren't playing the lottery to prepare yourself for retirement. You're playing the lotto in the hopes of getting to retire now.
Just like the folks who make Fear Factor know they can get a half dozen people to eat bugs and rats by offering one of them some money, just like the people who make American Idol know they can make fun of as many people as they want, if they offer one of them a record contract, the state knows it can get more money out of the lower classes by offering to lift just one of them out of their plight.
And please, spare me lecture on how the money all goes to good causes. Here in California, the lottery was pitched as an education saver. But if you ask anybody in the field of education, they'll tell you the local governments were more than happy to cut school funding for various projects since the schools, after all, could now fund those with lottery money.
And please, spare me the story about your sister's mother-in-law's friend who once won $20,000. One of the guys on Fear Factor got a car, too, but I'll bet his wife kissed him different after he ate that rat.