Why Playing Powerball Isn't Your Best Bet for Getting Rich

Forms for the Powerball lottery wait to be filled out at a gas station in Bowie, Md., Tuesday, Aug. 6, 2013. As of Tuesday, the estimated jackpot is $400 million.  (AP Photo/Susan Walsh)
Susan Walsh/AP
With Powerball jackpots hitting $500 million-plus payout levels more frequently these days, you might be wondering whether it's time to start spending a few bucks everyday playing the lottery.

But you'd be mistaken to take this as a serious path to wealth.

After all, the odds of winning the Powerball are tiny -- just 1 in 175 million. In fact, you're more likely to win an Academy award (1 in 11,500), die from a shark attack (1 in 60,453), or even date a supermodel (1 in 88,000) than you are to strike it rich playing the lottery.

And, as I'm sure you can gather, those are events you'll probably never experience.

And Yet People Still Play!

Even with such remote odds, people continue to play. In fact, it was one of the few purchases that didn't slow down during the recession.

In 2012 alone, Americans spent $78 billion on lottery tickets. And over the past 12 months alone, 57 percent of Americans bought a lottery ticket, according to Gallup.

But why? Most obvious is the "get rich quick" element. But it's more than just that.

One explanation is that people are blind to exactly how unlikely these odds are. (See examples above as a reminder.) In Adam Piore's recent article "Why We Keep Playing the Lottery," he quotes Canadian professor of health sciences Robert Williams, who studies lotteries: "[W]e have nothing in our evolutionary history that prepares us or primes us ... to try and grasp the remoteness of those odds."

Another way to look at it, as Piore himself puts it, is that it's an understandable way for those in dire financial circumstances -- with no obvious way out -- to feel like they're "buying hope."

Whatever the reason, it's not a serious way to accumulate wealth.

And although some may write it off as "just a few dollars here and there," let's take a look at how a similar amount could look over decades of playing.

$5-a-Day Habit

I've heard a few acquaintances talk about spending $5 a day on lottery tickets. Some spend more, some less -- but I'll use $5 a day for this example.

Over the course of a year, that habit adds up to $1,825. A fair sum. But not life-changing.
But here's what happens to that money if you set it aside over decades instead of playing this game of chance:

After 10 Years $18,250
After 20 Years $36,500
After 30 Years $54,750
After 40 Years $73,000
After 50 years $91,250

Remarkable, right? After half a century playing the lottery, this $5-a-day habit could've amounted to more than $90,000 in your bank account.

But Wait. It Gets Better.

You see, that money doesn't -- or shouldn't -- have to be idly sitting there. After all, if you've got it in a bank account, you'd be making a tiny amount of interest. But maybe you'd set it aside in higher-yielding CDs. Or maybe you'd even try investing.

Here's what that same habit would look like over the same amount of time:

In 5-year CDs* In an S&P 500 Index Fund**
After 10 Years $19,716 $31,994
After 20 Years $42,373 $114,980
After 30 Years $68,409 $330,222
After 40 Years $98,329 $888,505
After 50 years $132,711 $2,336,546

*Assumes Bankrate.com's average 5-year CD yield of 1.4%. **Assumes the market's average 10% return.

Now I'll admit -- it's not a hundred-million-dollar payout. And it's certainly not easy. There'd be regular temptation to cash it out and spend it. What's more, it takes decades to get there.

Yet even so, ending up with nearly $150 grand in a brokerage account is a heck of a lot better than looking at an empty bank account after a lifetime spent futilely "buying hope."

Adam Wiederman is a Motley Fool contributing writer.

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