The lottery is a popular pastime that gives people the chance to fantasize about winning a fortune for just a couple bucks. But it can be a big budget drain, especially for the low-income families who tend to play the most. Many critics say the game is really just a disguised tax on those least able to afford it.
The history of the lottery dates back to ancient times, but it was not until the 17th century that the concept caught on in Europe, where it became common for cities and towns to hold lotteries to raise money for their towns and public projects. Lotteries were used by the Continental Congress at the outset of the Revolutionary War to fund the Colonial Army, and were later adopted by many states for a variety of purposes, including raising money for schools, colleges, and public-works projects.
In the United States, most states now offer some form of lottery. They may have daily, multi-state games where you pick numbers or jackpot-sized games where you select six numbers from a range of 50. Retailers take a percentage of the ticket sales and cash in when someone wins.
While the odds of winning are very low, some people do get lucky. Some have won billions of dollars in the Mega Millions and Powerball, which are two of the largest lottery games in the world. Others have won smaller prizes, such as TVs and cars.
But there are some things you should know before buying a lottery ticket. First, it is important to remember that a lottery winner’s prize isn’t paid out in one lump sum. In the US, if you win the Mega Millions or Powerball, your prize is awarded as an annuity, which means that you will receive 30 payments over 29 years.
It’s also important to avoid picking numbers that are too close together or those that end with the same digit, according to Richard Lustig, who has won the lottery 14 times. He suggests using the numbers that start with the least frequent digits. Also, it’s a good idea to buy Quick Picks instead of choosing your own numbers. This way, you’ll have a greater chance of winning without having to share the prize with anyone who has the same numbers as you.
Finally, if you’re thinking of purchasing lottery tickets, don’t forget about interest rates. A lot of people are surprised to learn that interest rates actually play a role in the advertised jackpot amount, which is based on an annuity calculation. The higher the interest rate, the lower the annuity value.
Khristopher J. Brooks is a reporter for CBS MoneyWatch who covers personal finance, the U.S. housing market and the business of sports. He has also written for the Omaha World-Herald, Newsday and the Florida Times-Union. Follow him on Twitter @kbrookswriter.
Photo by Jeremy Lesser via Shutterstock.
The terms of the jackpot and the annuity are set by each state’s lottery commission. You can check your state’s lottery website for the latest rules.