The state-sponsored lottery is often referred to as a “tax on the poor” or an “idiot tax,” depending on who you ask. The lotto can be seen as one of the few ways to move up on the socioeconomic ladder for the poor. Meanwhile, cryptocurrency such as Bitcoin are leveling the playing field by offering not just much better odds at becoming richer, but also encouraging financial literacy.
The Lottery: A ‘Poor’ Choice
As the winners of the latest record $1.5 billion USD dollar Powerball jackpot are revealed, studies show that poorer households, which make a total of $13,000 or less, spend a much larger share of their income – roughly 9% – on the lottery. Moreover, many states such as Massachusetts, whose average annual ticket sales are an astounding $634 per capita, have been criticized for selling “hopium” to the masses.
Let’s take a look at some other lottery facts in the US:
- The odds of winning the grand prize are 1 in 195,249,054;
- The average person in the US spends roughly $300 a year on tickets;
- 65% of lottery winners are bankrupt within 15 years;
- The real value of a $1 lotto ticket is often as low as 32 cents.
The lottery is big business in the United States, and the biggest source of revenue for some states, e.g. as high as 36% of total revenue in West Virginia and Michigan. Therefore, it is no surprise why the value of a $1 purchase can be as low as 32 cents. This is because the additional cost goes straight into the coffers of the state government — a furtive strategy on behalf of the authorities to secure funds without raising taxes directly. In other words, the ticket sellers benefit from the daunting low odds and a high number of players, which invariably gets higher as the jackpot grows due to the press-fuelled hype and resulting mass hysteria.
So considering these laughable odds of winning, it is no wonder why many “financially literate” from Wall Street equate this type of investment with flushing your money down the toilet. But while the Lotto can seen as peddling “false hopes,” the counterargument should also be taken into account.
“[The poor] were playing the lotto because it is one of the only legal opportunities available to them to become rich,” argues a Guardian article. “When you are poor, you make what others view as irrational decisions not because of ‘stupidity’ but because of limited options …The wealthy have many routes to legally make money without having to play the lotto.”
Certainly, the poor have to struggle on an unlevel playing field, but is “investing” 9% of your meager income on such dismal odds the only option that’s available today?
Bitcoin Can Help
Still unbeknownst to many is that the financial landscape has changed dramatically with the invention of the world’s first public, opt-in currency. It provides everyone with a slew of new opportunities such as trading it directly or using it as a vehicle to buy and trade anything from dollars to gold, to even betting on future outcomes; the possibilities are endless.
For example, Bitcoin had an impressive past year rising roughly 35% against the dollar as most fiat currencies depreciated. If 9% of $13,000 or roughly $1,200 worth of bitcoin were bought a year ago, the buyer would have made a considerable profit compared to lotto tickets, where a return of little to none of your money is all but guaranteed. Also, even if Bitcoin’s price dropped like it did in 2014 – the person holding the coins would still retain these, after which they can (and did) appreciate in the future.
“I would love to see someone quantify the math, but I’m certain bitcoin is a better investment. Being a censorship resistant value transfer will one day pay of really well but obviously not to the tune of $1.5 Billion. I for one did not waste any value on playing the Powerball.”
Of course, everything appears to be straightforward in hindsight, and no one can predict what will happen to Bitcoin as we go forward. However, it’s difficult to find an investment with worse odds than the Powerball, toilet bowls excluded. So putting a small portion of your hard earned cash into the next big thing is probably a better strategy by comparison.
Additionally, opting to get into Bitcoin likewise encourages people to boost their financial literacy as the responsibility of managing your finances falls directly on you, the user. Financial literacy essentially means having the skills and knowledge to make informed financial decisions for secure savings, budgeting and wise borrowing; and becoming a digital currency user means at the very least knowing how to set up and manage your digital wallet account, to trading smart-property on a Bitcoin exchange, for example, or even “mining” bitcoins.
Education Still Fundamental
It must be stressed that cryptocurrency is by no means a ticket out of poverty and no panacea to financial inequality. Bitcoin can, however, serve as the gateway to financial responsibility and a better understanding of how money works. Educating yourself on how to manage your money is absolutely crucial regardless of what currency you use, especially if you come from a lower-income household.
“Financial literacy varies significantly among the poor, especially in relation to a financial landscape that is rapidly changing,” explains Monique Cohen in the Global Microcredit Summit Paper on Financial Literacy. “Financial diaries studies … have demonstrated that most poor people are good financial managers in familiar environments where a majority of financial transactions occur either informally or involve money stored at home.” It adds:
“When their existing knowledge and competencies are not applicable to an ever changing financial landscape, people are limited in their ability to act.”
With Bitcoin, the choice is ultimately yours as it can encourage you to become a wiser manager by giving you back control over your money to invest in almost anything. You can even use it to buy those same lotto tickets, though it’s not recommended: because even if you are among the winners of the $1.5 billion dollar Powerball jackpot, the amount doled out to the three winners after taxes would be much, much less — which considering the odds to begin with — is a terrible value proposition indeed.
Would you rather spend your savings on lotto tickets or bitcoin? Share your thoughts and comment below!