Hope Costs $412 a Year: Why Lottery Buyers Expect to Win
Americans spend more on lottery tickets than movies, video games, music, sporting events, and books combined. And who buys them? Mostly poor people. The lowest income households in the U.S. on average spend $412 a year on lotto tickets, four times the amount of those in the highest income groups.
— Morgan Housel
Housel points out that the people who spend more than $400 a year on lottery tickets also typically belong to the 40% of Americans who cannot come up with $400 in an emergency.
This mismatch isn't about finance so much as human psychology. People tend to overweight low-probability events like winning the lottery. They also underweight high-probability events, such as needing $400 for an unexpected expense sometime this year.
When the payoff is huge, buying a ticket can seem worthwhile because, without it, you have no chance of winning.
Read more in Morgan Housel's book, The Psychology of Money. The Wall Street Journal called it "one of the best and most original finance books in years."
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