Big Lottery Winner? Or Loser?

Everyone dreams of winning the lottery and living the rest of their lives on Easy Street. Wouldn’t that be nice?  Of course it would!  But really, what are the odds of winning the lottery?  According to the Western Canada Lottery Corporation website, the odds of winning Lotto 649 are approximately 1 in 14 million and the odds of winning Lotto Max are about 1 in 28 million. 

Even if you played Lotto 649 twice a week, every single week, from age 18 to 931, your odds of winning are still only about 1 in 2,000. Or 0.05%.

For comparison, your odds of dying from an accident are about 1 in 22, or 100 times more likely than winning the lottery.

In fact, being struck by lightning over your lifetime is almost as likely as winning the lottery. And how many people do you know who have been struck by lightning?

Despite the terrible odds, thousands of people still play the lottery.  They all want to be able to quit their jobs and live a life of luxury.  And they spend hundreds of dollars a year for a tiny chance of winning.

Could that money be put to better use?

The Cost of Playing

Let’s say you start buying lottery tickets when you turn 18, and you stop buying them when you die at age 93. That’s 75 years or 3,900 weeks.

If you buy two tickets per week at $3 per ticket, that’s $6 a week, or $26 a month.

Multiply $6 per week by 3,900 weeks, and that’s $23,400 you’ve spent on lottery tickets during your lifetime.  And that’s only two $3 tickets per week – many people who play the lottery spend much more than $6 a week.2

The Lottery vs. Investing

Now, given the massive odds against winning, should you invest or play the lottery?  Let’s see what happens if you use this money elsewhere.

This graph illustrates the difference between playing the lottery and investing your $26 per month instead.3

Notice that, even with a savings account paying only 1% interest,  you will still end up with 10 times the amount you would by playing the lottery.

Of course even when playing the lottery you will end up with some money. For your $23,400, we’ve calculated you might win around $3,700.

We calculated this prize breakdown using the Lotto 649 website, assuming 7,800 plays:

  • 915 free plays = $300
  • 96 – 5 dollar wins = $480
  • 137 – 10 dollar wins = $1,370
  • 7 – 4 of 6 number wins (prize varies with an average 80 dollars per win) = $588

Total = $2,738

Then you also have a 14% chance of winning a 5 of 6 number prize valued at about $2,200

Assuming your winnings may be a bit higher than average, we determined the $3,700 amount shown on the chart. Or a loss of 80-90% of your money!

With that lost $20,000 you could buy a car, several vacations, or retire earlier than your lottery-playing coworkers.

Speaking of retirement, look at those investment returns! Even with a moderate 5% return, that extra $200,000 would be pretty handy wouldn’t it?

The Lottery vs. Insurance

In your lifetime you are about 1,000 times more likely to get cancer than to win the lottery. Which should you be more concerned about?

Let’s compare playing the lottery to two types of insurance:

Critical Illness Insurance

This is a contract with an insurance company that means you will be paid a lump sum of money if you are diagnosed with a “critical illness” (most commonly cancer, heart attack, or stroke).
Do you know anyone who has had these problems? I bet you do.

The money you receive can allow you (or your spouse) to:

  • Take time off work
  • Pay for expensive treatments that aren’t covered by Alberta Health Care
  • Pay additional costs such as babysitters, house cleaners, parking at the hospital, or whatever else you need

Then you can focus on your recovery without having the extra stress of worrying about money. 

The exact policy details will vary, but as an example, if you’re an 18 year old woman who doesn’t smoke and is in good health, $26 per month can buy you a $31,000 policy which will cover you until you’re 100 years of age. This also includes a return of premium if you don’t make a claim.

So if you estimate that 1 in 2 people will have a claimable condition (cancer, remember) prior to age 93, then you have a 50% chance of receiving the $31,000 exactly when you need it. And if you don’t have a claim before you die then your premiums are returned to your estate or beneficiary.

Compared to the odds of winning the lottery, isn’t critical illness insurance a much better choice?

Life Insurance

We’re all going to die at some point, like it or not.  Instead of playing the lottery you could spend your $26.00 a month on life insurance.  
For a healthy, non-smoking, 18 year old woman you could obtain $52,000 of coverage for your entire life.

Now, you may be thinking, what good is life insurance if I have to die in order to get it?  I’ll tell you something – life insurance isn’t about you.  It’s about providing for your family after you’re gone.  It’s about making sure that they are not going to get rocked financially after they have already been rocked emotionally by your death.  That’s why life insurance is a good idea.

If you expect to provide for your family by winning the lottery, think again.  It’s not going to happen.  Get life insurance instead – it’s a much better investment.  And your family will thank you for it.

Let’s compare your lottery earnings to the average insurance payout for the above two options.

Are you rethinking buying that lottery ticket? I hope so. There are so many better ways to spend your hard-earned money.

Co-authored by Sharon Skwarchuk and Meena Kestirke

  1. The current average life expectancy of a 20-year-old woman
  2. Canadian average is about $500 a year, compared to our example of $300 per year.
  3. Interested in playing around with investment amounts? Check out this calculator.

Leave a Reply