If you want to worry about the state of math instruction in this country, just note the number of people who buy lottery tickets on a regular basis. They spend about $2 million a week in which there is no special jackpot.
That number rises exponentially when there is a huge pot at stake, as there was this summer when the Powerball winners divided up $448 million. That sounds like a lot until federal, state and local taxes kick in. And whose benefit did you think the lottery was run for? Yours or the government’s? Hint: The states took in almost $20 billion from their lotteries last year. How well did you do?
What you get for a $2 ticket is the ability to daydream about what you would do with all that money. The problem is, many winners fulfill their dreams and in no time are living in the back of their ’87 Camaro — the Mercedes has been repossessed, as has the McMansion — and subsisting on specials from the dented-can bin.
There is a skill to managing large amounts of money, and most of us don’t have it because we’ve never had large amounts of money to practice on.
(Even then, you rarely see gambling executives actually playing their own casinos’ games. If they do, it is with house money in the belief that the example being set will cause you to part with your own. Similarly, that’s why investment bankers much preferred speculating with customers’ money.)
There is actually an outfit — the Sudden Money Institute — that works with those rare folks who hit the lottery big and helps them invest their winnings after the various tax offices finish picking over it.
Working with the institute and a bank, The New York Times estimated that a winner wanting to spend $1 million a year, adjusted for inflation, over 55 years would need about $36 million after taxes to invest. This presumes the winner has the internal discipline to keep his hands off the $36 million before it’s invested.