Americans spend more money on lottery tickets than they do on milk… or beer. As a nation, we manage to drop $75 billion, per year, into state-run lotteries. In fact, the average player in America spends over $500 per year, and heavy lottery players routinely crack $1,500. That, dear friends, is a lot, especially given the odds are better of being struck by lightning _twice_ in a single lifetime (1:9M) than actually winning a jackpot (1:300M). With this level of personal savings going into almost impossible lotteries, you have to wonder: Why?
Before we answer that, please indulge us and do a quick little experiment with your friends: Grab somebody that works in a regular American job – please, no ascot wearing startup founders or pinstriped masters of the universe. Get a regular friend who works in a regular job. Now, ask that person to imagine themselves as a multi millionaire – have them picture their newfound wealth and all its trappings. Next, ask your friend to explain to you how – in their imagination – they managed to accumulate all that money. (Note: None of what they offer as an explanation can be even close to illegal.)
What did they say? Did they say they got there through diligent personal savings and investment? Ha! Was it an unexpected inheritance from a long-lost uncle? Maybe. Did they say they won the lottery? Probably. In my experience, that last answer is the most common. You see, for most of us, it’s very hard to imagine how we can actually, legally, get our hands on millions of dollars. So, for some people, the only path to serious wealth – aside from helping that Nigerian Prince get his family’s money out of Africa – is to win the lottery. It doesn’t matter that the chances of actually getting rich are about the same with the lottery and the Prince (i.e., close to zero); at least the lottery is legal and legitimate. The lottery thus fills a real void that people are willing to pay money to fill; i.e., to have a CHANCE of getting rich.
Now, let’s summarize a bit: We are not saying state-run lotteries are useful and worthwhile. Rather, we are saying that lotteries do a legitimate thing – they fill a void – for many people. And that is why the average player spends $500 dollars per year. Now, remember that $500 number. Why? Because we know that 63% of Americans do not have enough money saved to meet an unexpected bill of… $500. Yes, well spotted. That is the same amount. Now, imagine we could redirect the $500 people spend on the lottery into a personal savings fund of $500 to meet unexpected bills? Wouldn’t that be awesome?
That is precisely why we at Long Game have launched a prize-linked savings app in all 50 states.
For those new to the subject, a prize-linked savings account is a sort of lottery-lined personal savings mechanism in which individuals receive chances to win prizes just for saving money. A PLSA combines the instant gratification of a lottery with a long-term savings account. Some have called PLSA a “no-lose lottery” in that – you guessed it – you can’t actually lose money despite the fact that you have a chance to win money. How is it even possible to save money while you win money? Well, as an example, the small interest that might be paid to each individual saver can be used to pay a single big prize for a single saver. That’s a PLSA, and, when it’s done well, we think it can be a replacement for the lottery.
Like a lottery, a PLSA offers a legal and legitimate means to change your life through luck. The difference, however, is that with a PLSA you get all the hope with none of the the financial loss. Win-Win.
Our motivation at Long Game has always been to help people save more money and thus empower them to take control of their own lives. In our view, converting lottery gamblers into personal savings specialists is an important step in this direction. Onward…