News that the cost of playing the National Lottery is going to double to £2 a line from later this year is likely to upset some regular players.
Whilst the minimum prize for matching three numbers is being increased from £10 to £25, and the average Saturday jackpot will increase from £4.1m to £5m, playing the lottery remains an expensive and unlikely way to achieve wealth.
Despite the odds being stacked against those who choose to play the National Lottery, many still believe it is their best chance of achieving financial freedom.
We wrote recently about how £1m is viewed as a ‘trigger figure’ for giving up work permanently, with most believing that a lottery win was the best chance of getting their hands on such a pot of cash.
It is worth remembering that your odds of winning a substantial prize when playing the National Lottery are extremely low. The odds of winning the Lotto jackpot are currently 13,983,815 to 1.
It could be you, but it probably won’t be.
Matching five numbers plus the bonus ball comes with odds of 2,330,635 to 1. When the new £2 Lotto is introduced in the Autumn, the prize for matching five numbers plus the bonus ball will halve to £50,000.
An alternative to playing the National Lottery is Premium Bonds from National Savings & Investments, where the odds of winning a top prize are lower but you at least retain your stake.
In a typical draw, the odds of winning a £1m prize with Premium Bonds are some 44 billion to one, making a jackpot win in the Lotto seem like a sure thing by comparison.
NS&I use a notional interest rate of 1.5% to determine the total prize fund for Premium Bonds, with all prizes tax-free. If you hold Premium Bonds for long enough and have average luck, this is the return you might expect to receive on your money – price inflation will certainly erode the real value of such an interest rate.
Assuming you understand the odds and risks, there is nothing wrong with playing the Lottery or investing in Premium Bonds.
What it would be wrong to do is build a Financial Plan around the possibility of winning a big prize.
Disclaimer: I occasionally play Euromillions, which comes with odds of 116,531,799 to 1 of winning the jackpot. I’ve never won a prize of more than £5.40.
I held Premium Bonds for over ten years and never won a penny. This personal experience might have shaped my views on the subject.
Photo credit: Flickr/JLM Photography
