What is a Lottery?


A lottery is a game where a small number of people buy tickets for a chance to win a huge sum of money, sometimes millions of dollars. Lotteries are run by state and federal governments, and are similar to gambling in that winning the jackpot requires some degree of luck. This video explains the concept of a lottery in a simple way for kids and beginners. It could be used as a money & personal finance lesson for K-12 students and teachers, or for anyone interested in learning more about this topic.

In modern American culture, the lottery has become synonymous with unimaginable wealth, and a national obsession with hitting a multimillion-dollar jackpot has coincided with declining financial security for most working Americans. The nineteen-seventies and eighties saw the income gap widen, pensions erode, health-care costs spiral, and unemployment rise. For many Americans, the long-standing national promise that education and hard work would render them better off than their parents ceased to hold true. Life, in short, began to imitate the lottery.

Cohen argues that the popularity of the lottery has something to do with this change in America’s fortunes. Beginning in the nineteen-sixties, he writes, growing awareness of all the riches to be had in the gambling business collided with a crisis in state funding. Faced with rising population, inflation, and war expenses, the budgets of many states collapsed, making it impossible for them to balance without raising taxes or cutting services—both extremely unpopular options with voters.

This era also gave birth to a new type of lottery advocate. Rather than argue that a lottery would float the entirety of a state’s budget, these new advocates focused on a single line item—usually education or elder care or public parks, but often veterans’ benefits—to which they could link the lottery. By limiting the lottery’s appeal to just one line item, they made it easier to campaign for legalization.

During this time, lottery sales surged, as did the size of jackpots. As a result, the odds of winning grew exponentially. And, as with any commercial product, the more a lottery is promoted, the more people are likely to buy it. Because of this, lottery advertising is most heavily concentrated in neighborhoods that are disproportionately poor, Black, or Latino.

While some people are tempted to buy more tickets in order to increase their chances of winning, the rules of probability dictate that each ticket has an independent probability that is not affected by how frequently or how much you play. In addition, winning the jackpot typically takes three decades to pay out, which can be a daunting prospect for some. For this reason, many choose to invest their winnings in zero-coupon bonds instead of spending them immediately. This allows them to enjoy the prize over a longer period of time while keeping their cash in their pocket for other investments. Moreover, the New York State Lottery has also begun offering a lump sum option to its winners.