Most lotteries are a sucker’s game. But a group of credit unions in Michigan has come up with a lottery that everyone wins. The idea is that each time a customer makes a savings deposit of $25 or more, he or she is entered into a raffle to win $400, plus a chance to win the $100,000 annual jackpot. Even if you lose, you’ve still increased your personal savings. The Wall Street Journal reports that the savings lottery has brought in some $3.1 million in new deposits so far. [%comments]
A Lottery for Smart People
TAGS: lottery
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. You can also watch it on 
In the UK these are known as Premium Bonds. 100 GBP buys 10 premium bonds. A random number generator chooses a number of winners each month and there is large prize of a million pounds.
The probability of winning this makes the National Lottery seem like a good bet. However, there are also a number of much smaller payouts. The probability is such that the payout is on average less than the interest in a savings account. Although with interest being at an all time low, it could be a reasonable investment at the moment.
Treating the merits as scalar values would indeed frame this as a 4.25% + Toaster vs. 4.5% problem. However, approaching it as a vector-based solution shows that they simultaneously increase deposits while giving everyone an option to win. Considering how indebted US citizens are, this may result in a Pareto improvement, creating wealth instead of destroying or redistributing it.
And here we were taught to believe that the stock market is the “Lottery for Smart People”…
This isn’t a lottery for smart people, it’s the smart lottery for dumb people.
Clearly it would be more prudent to invest your money at an assumed higher rate without the lotto element. However, for people who need/seek the thrill of possibly winning something, it’s far better to sacrifice a portion of the return to keep their principal. Also, the thrill may actually encourage additional savings. So again, a smart lottery for the less prudent among us.
sounds like a ponzi scheme
I checked out the flash program that you linked to and it’s wrong. It appears to underestimate the number of wins by only counting a match when that number appears in the column. This is not how a lotto number is actually chosen. You can see correct picks passing by uncounted in the program. That being said, you’re still foolish to play the lotto. My example: would you spend a dollar to be blind-folded and try to pick the one red ping pong ball from the floor of a square room covered with ping pong balls that is 1840 feet on each side (about 3385000 sq ft with 1.58 inch wide balls lined up in rows, not staggered). I often see people spend much more than a $1 to play. Would you spend $10 to play if the room were a tenth the size? Would you spend $100 to pick one ball if they covered 7 basketball courts? I’ve heard Garrison Keillor say the lottery is a tax on people that didn’t do well in math. That sounds about right.
Ah ceteris paribus, the problem with economic modeling is exemplified by all the comments here. All you neigh sayers assumes that the bank can’t leverage the incoming funds and yield a better return then they would have before. I’m not saying they did, just that its a possibility and so many of you should be so quick to dismiss.
similar to this but with higher winnings (main was 2 mln zlotys ie. $600,000) – Bank Zachodni (in Poland) http://manager.money.pl/strategie/case_study/artykul/de;vito;zgarnal;dla;bz;wbk;4;3;mld;zlotych,24,0,495128.html (in polish so try translator), sum of gathered deposits = 4,3 billions zlotys