Why You’re Better Off Investing Your Weekly Lotto Ticket
For many, purchasing a weekly lotto ticket is a small indulgence with the dream of winning big. However, the odds are overwhelmingly stacked against you. Instead of spending that money on a lottery ticket, consider investing it. The potential returns from even modest investments can be substantial over time, thanks to the power of compound interest.
The Reality of Lotto Odds
Powerball
Cost: $15 per Powerdip (10 lines of Powerball)
Odds of Winning: 1 in 3,838,380
Average Prize: Over $11 million
Regular Lotto
Cost: $7 per Lucky Dip (10 lines of Lotto)
Odds of Winning: 1 in 383,838
Average Prize: Over $350,000
Understanding the Odds
While these figures are enticing, the odds make winning a long shot. Lotto NZ explains that if you buy a $7 ticket, your odds of winning first division are 1 in 383,838. It's natural to think, "Hey, that’s a chance!" But before you get excited, you should know that our brains aren’t wired to appreciate such low odds, and those are indeed low odds.
To put this into perspective, let’s think about the number of stars in the night sky. Did you know that there are only 4,548 stars visible to the naked eye in the southern hemisphere? Your odds of winning first division (1 in 383,838) with a $7 ticket are the same as picking just one correct star in the night sky over the next 84 nights. Similarly, your odds of winning Lotto Powerball with a $15 Power Dip ticket (1 in 3,838,380) are the same as choosing the right star from all the visible stars over the next 843 nights!
Information from Safe Gambling NZ.
Investing Instead of Playing
Regular Lotto Investment Scenario
Investment: $7 per week
Annual Return: 8%
Time Frame: 30 years
After 30 years, your weekly $7 investment would grow to approximately $42,832. Here's the breakdown:
Total Contributions: $10,920
Compounded Interest: $31,912
Doubling the Investment
Investment: $14 per week
Annual Return: 8%
Time Frame: 30 years
After 30 years, your weekly $14 investment would grow to approximately $85,664. Here's the breakdown:
Total Contributions: $21,840
Compounded Interest: $63,823
Powerball Investment Scenario
Investment: $15 per week
Annual Return: 8%
Time Frame: 30 years
After 30 years, your weekly $15 investment would grow to approximately $91,783. Here's the breakdown:
Total Contributions: $23,400
Compounded Interest: $68,383
Doubling the Investment
Maybe you play twice a week? Let’s double the investment to see what that looks like.
Investment: $30 per week
Annual Return: 8%
Time Frame: 30 years
After 30 years, your weekly $30 investment would grow to approximately $183,565. Here's the breakdown:
Total Contributions: $46,800
Compounded Interest: $136,764
Money You Will Likely See Again vs. Money You Will Likely Never See Again
When you invest your money, you are putting it to work for you. With an 8% annual return, you are much more likely to see significant growth over time. This contrasts sharply with the extremely slim odds of winning the lottery. By investing the money you would spend on lotto tickets, you can build a substantial nest egg that can provide financial security and support your retirement goals.
Turn your dreams into plans
While dreaming of a lottery win is fun, the reality is that investing your money wisely is a much more reliable path to financial growth and security. By choosing to invest rather than gamble, you are making a decision that can positively impact your future and help you achieve your financial goals. Instead of betting on the nearly impossible odds of winning the lottery, invest in your future with a plan that can help you build real wealth.
References & Notes:
Investment Projections have been calculated using the Sorted NZ Savings Calculator
The projections have not been adjusted for inflation and the 8% p.a. return is based off the average 10 year return from a KiwiSaver growth strategy of (8.4%) as per the Morningstar March Quarter Report and has been used for illustration purposes only.
If you want to know more voluntary contributions towards your KiwiSaver, or if you want to learn more about planning ahead for your retirement, please complete one of our quizzes below and book in a time to speak to Adam.
Compound Wealth are based in Mount Maunganui, Tauranga and offer KiwiSaver, Investment & Retirement Financial Advice to clients all over New Zealand.