Stop Buying Lotto And Hit The Jackpot
Winning Lotto can make you an instant millionaire, but how much richer would you be if you didn’t buy tickets? Diana Clement looks at the odds and the alternatives.
18 October 2021
Most Kiwis don’t realise how much money they throw away on their magic numbers – or that this money could make them rich anyway.
If you think you’re going to win Lotto in New Zealand, don’t bank on it. Your chances per line of winning Powerball are just 1 in 38,383,800.
But you could be a winner, even without getting the right numbers. Let’s take a look at how you could get rich.
Option 1: Don’t buy the ticket.
Let’s say every week you buy the cheapest Lotto Triple Dip ticket at NZ$16.
Stop buying them and over a year you’ve saved NZ$832, without any investment growth.
Over two years, you’d have $1664, which would add up to enough when borders open for a short family break to the Gold Coast, the Pacific Islands, or a very nice jaunt to Rotorua.
Call it a Lotto break, and the experience could provide children with a very good lesson in how to manage money.
Option 2: Join KiwiSaver. Watch it grow.
If you’re not already in KiwiSaver, start an account and put in that money instead of buying a ticket each week.
You’ll get a 50 per cent instant return from the government contribution.
You then have NZ$832 + NZ$416, which equals NZ$1248 for the year. Year after year, that soon adds up.
Let’s add some investment growth to that.
Voluntary contributions of NZ$16 a week over 40 years means you could have NZ$193,925.57 in your KiwiSaver account when you retired at 65.
To work that out, we used the KiwiSaver calculator at Calculate.co.nz. It assumes that you’ve invested your money in a growth fund, are on a low income so you’re only paying 17.5 per cent prescribed investor rate (PIR) tax, the account management fee is 0.40 per cent, and inflation is running at 3 per cent a year.
Option 3: Already in KiwiSaver? Add voluntary contributions.
If you’re on a NZ$70,000 salary, already investing and getting employer contributions and the government contribution, adding your NZ$16 a week as a voluntary contribution could take your returns at retirement from NZ$587,178.64 to NZ$684,655.99.
You could be nearly a hundred thousand dollars better off.
That’s worked out with a PIR rate of 28 per cent, inflation at 3 per cent and salary rises of 2 per cent a year.
Option 4: Use it towards your first home.
There’s more. If along the way you withdraw some of your KiwiSaver money to buy your first home, you’ll get capital gains on the house too – and we all know how crazy house prices have gone.
The moral of the tale is that NZ$16 a week can make you wealthy if you invest it wisely. It shows the power of small sums invested regularly.
Option 5: Pay off debt.
Sadly, people often spend money on Lotto that they don’t have.
If you can’t afford to add the money to your KiwiSaver, you should at least direct it to paying off debt. That will save you a lot in interest over the years.
Option 6: Have a flutter – and still have the cash.
In the meantime, if you wanted a small flutter without spending the NZ$16 on gambling, you could save it into a prize saver account.
Admittedly, the interest on these accounts isn’t great. Co-operative Bank’s Prize Draw Saver, for example, pays only 0.10 per cent interest, but you’re in the draw to win a Mini Cooper car each month. And even if you don’t win, you’ll still have your NZ$16.
TSB offers a single prize of NZ$25,000 a month if you have more than NZ$1,000 in your Premier or WebSaver account.
ASB Bank’s PrizeSaver account gives away 10 prizes of NZ$1,000 each month. It’s not quite Bonus Bonds (which are no more), but you do have a chance to win.
Do you really want to win Lotto?
Becoming a winner can be complicated. For some people, winning Lotto can be a curse.
Many Lotto winners burn through the entire lot and end up poor again. You don’t have to search hard to find stories of such Lotto winners.
UK winner Mickey Carroll won £9.7 million at the age of 19 in 2002. According to The Mirror newspaper, he wasted millions on cocaine, gambling, and prostitutes, and ended up as a factory worker living from pay day to pay day.
New Zealand’s own 26 million-dollar-man, Trevor Cooper, a former supermarket worker, is said to have blown much of his money on cars, houses, and more.
Finally, if you do win, you need to be very sensible with your windfall.
What to do if you do win
Lotto New Zealand puts winners in touch with experienced staff at their bank to get advice.
Neville Giles, a senior private banker at ANZ Private is one of those advisers who meets regularly with Lotto winners.
He says it’s a great part of his job.
The first thing he tells winners is to keep the circle of who they tell small, to avoid people trying to get money out of you.
Then, don’t do anything rash, like quitting your job or buying a bach and a high-end boat. Sometimes people don’t realise the ongoing costs of those expensive toys.
“If you’re going to treat yourself to something, just buy bubbles for a hundred bucks,” says Giles.
“Don’t buy anything more expensive until you’ve had time to think about it.”
Put the money into a three-month deposit account while you make a plan, he says.
Yes, you could buy everything you want now, but by investing the money, you’ll be setting yourself up for a lifetime of higher earning, says Giles.
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