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  • Dan Connors

Lotteries- a pocket full of hope but poison for mental and financial health.

Updated: May 27, 2022

State lotteries are a complicated source of joy, pain, education funding, hope, and disappointment. 45 of the 50 United States now have lotteries that they are dependent upon to finance their education systems and more. Is all this state-sanctioned gambling doing any actual good, or is it causing more problems than it solves?

State lotteries started in the 1960's and 70's, with Missouri enacting theirs in 1986. They have become enormously popular. Some $91 Billion was spent on lottery tickets in 2019, more than on all movies, sporting events, and concerts combined. The average person spends $200 per year on lottery tickets, with spending much higher in lower income households.

Lotteries admittedly have done a lot of good for many people, but they've fallen way short of their original promises, and the net result to society of state lotteries is quite possibly negative. There are four huge problems with lotteries that never seem to get addressed, and until they do things will not get any better. Mental and financial health for many will continue to suffer from these flaws of the system.

1- Lotteries only pay out 60% of what they take in. This is a lower take than the stingiest slot machines (80% in Missouri) The odds of winning the lottery are not good, and for the big jackpots that attract the most attention, the odds are infinitesimal. Lotteries take money out of the economy, and the ways they add it back are often random and destructive.

2- For those that win a lottery, it can be at best a mixed blessing. Lottery winners are more likely than the losers to declare bankruptcy, with some 33% of them estimated to go bust in one study. Jackpot winners report being besieged by greedy relatives, and often end up blowing their money on an extravagant lifestyle they are ill-prepared for. Most winners are simply not prepared for the repercussions of temptations, taxes, clouded judgments, and attention from relatives and strangers.

3- The main beneficiary of most state lotteries, schools, are not actually benefiting that much. State education budgets have not risen significantly with the addition of lotteries in the late 20th century. If anything, schools are struggling more financially than they did before lotteries came on the scene. States have used the lottery money inflows to replace spending from their general funds, (not add to it), which allowed them to spend more money on other things or give out generous tax cuts. Some $350 million went to schools in Missouri in 2019, and it certainly did a lot of good, but before lotteries were on the scene this money was generated by taxes. Which brings me to the next problem.

4- Lotteries are in actuality regressive taxes on the poor for services that benefit the wealthy. People that can least afford it are spending money on lottery tickets, while those who would have been taxed to replace the lost education money get tax cuts. That, plus large chunks of lottery money go to universities, which are out of reach for many of the poorer people funding the lotteries with their purchases. A university education is a much more effective life-altering event than a lottery jackpot win.

So what's going on here? Why are lower-income families being suckered into betting on lotteries that they know their unlikely to win? The answer comes down to one word- hope. For poor Americans today, there is little hope that their situations will realistically get better. Income levels are more stratified than ever and opportunities to climb the ladder out of poverty are harder and harder to find. The lottery offers them the one thing they need the most- hope for a better day- winning an amount so large that it rescues them from their problems. Perhaps that's why lottery ticket sales generally go up during recessions.

Without hope, life has little meaning. Drugs, alcohol, depression, and death await those who give up any chance of seeing better days. That little lottery ticket in your pocket gives you a fleeting feeling that all is not lost. It helps keeps the poor from revolting against a system that's rigged against them. Unfortunately, most of us are smart enough to realize deep down that this necessary crutch of hope is an illusion. Unlike this guy:

We need hope so much that we cling to it with every tiny bit of encouragement that we see, just like the thousands of singers who try out for American Idol every year dreaming of musical superstardom. The problem with lotteries and other rigged game shows is that the odds are not remotely in our favor. Luck isn't a good way to allocate meaning and success. In most cases, we would do better to find alternative ways to get what we want that aren't as flashy and risky.

So what's the answer? Lotteries are here to stay, and we probably need them around more than we'd like to admit. But there is an alternative that's been proven to be better at least for people in dire financial situations- prize linked savings accounts, or PLSA's. Playing the lottery or gambling is a fine diversion, but if there's even a tiny bit of reliance on lottery money as your ticket to a better tomorrow, you need to drop that lottery habit now and look at PLSA's.

Prize linked savings accounts, now available at some credit unions, are bank accounts with a twist. Deposit money in your account and you get entered into a lottery with the other depositors. Every month or quarter, the pool of money results in lucky depositors winning cash prizes of $25 to $5000. The best news is that all those who don't win get to keep their money plus interest. It's truly a win/win for everybody involved, and encourages those who can least afford it to save while giving them an ounce of much-needed hope. For those who at the lowest ends of the ladder, just having money in a bank account is a struggle, and this can be the difference between homelessness and financial stability.

Imagine what would happen if employers made their 401k accounts work like this. Participation would skyrocket, though something would need to be done to channel prize money to those who otherwise wouldn't participate. Employers could give random, huge bonuses to employees through a lottery that would improve morale and reduce employee turnover.

We all need hope. But the brutal fact is that most of us won't win a lottery jackpot, become a rock star, or make millions in the movie business. Clinging to sky-high goals does more harm than good. Support education certainly- but do it the right way and not by exploiting the poor. We need better lifelines to a positive future than random drawings, and everybody deserves to have something real to hang their hopes upon.

For more information about PLSA's visit Participating credit unions can be found through their website.

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The above information is provided courtesy of the author who has done his best to be factual. You are still responsible for interpreting and checking those facts elsewhere, and I make no representations that I am a mental health expert beyond what I presented. Thank you.

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