The Lottery – A Powerful Money & Personal Finance Lesson For Kids and Teens


The word lottery has many meanings, from a game in which tokens are sold for a chance at winning money or goods to the process by which people are selected for jobs or housing. In this article we will focus on financial lotteries, where multiple people buy tickets for a small amount in order to have a chance at winning a large sum of money through a random drawing. These lotteries are often run by state or federal governments, although private companies also operate them. The concept of the lottery is a powerful tool to discuss with kids and teens as part of a money & personal finance lesson or unit.

The first recorded lotteries were held in the Low Countries in the early 15th century, to raise funds for town fortifications and to help the poor. The name presumably comes from the Dutch word for drawing lots, or lottery (later shortened to lot), though it may be a calque from Middle French loterie and a conflation of Latin lotto and Old English lothe.

Lottery revenues expand dramatically after they are introduced, but then level off and sometimes decline. This is due to a combination of factors, including the fact that people become bored with the same games over time, and the need to introduce new games to keep people interested.

As a result, most states spend far more on the lottery than they make back in revenues. This has led to a situation in which the lottery is almost a parasite on the government. Critics have long pointed out that the money spent on lottery tickets does not create any benefit for society, and is no more beneficial than spending taxes on alcohol or tobacco, two other vices that governments use to raise revenue.

In addition, the purchase of lottery tickets is not rational in a decision model based on expected value maximization. Moreover, the tickets may be purchased to experience a thrill or to indulge in fantasies about becoming wealthy. Thus, the existence of a lottery is a prime example of a social choice problem that is not solved by market efficiency.

Despite these problems, most states have continued to hold lotteries. The continuing evolution of a lottery illustrates how public policy decisions are often made piecemeal and incrementally, with little overall direction or scrutiny. The resulting policies can have substantial and far-reaching effects on people’s lives.

It is clear that the lottery is not a good way to raise money for state projects, but what is less evident is how much people are willing to pay to try and change their fortunes. The most common message that lottery operators rely on is that even if you don’t win, you should feel like you did your civic duty to support the state by buying a ticket. This is a dangerously misleading message that obscures the regressivity of lottery revenues and the fact that many people play it to avoid paying taxes.