The Odds of Winning a Lottery Jackpot Aren’t As High As You Think

The term jackpot is commonly used in finance to describe a large windfall from a lottery, investment or other source. But the odds of winning a lottery prize are not as high as you might think.

It’s human nature to daydream about a lottery jackpot, backing the right horse or getting in on a hot IPO. However, that’s not the same as understanding how rare such an event actually is. “Human beings have a fundamentally difficult time with risk when it comes to things that are very, very rare,” Victor Matheson of the College of the Holy Cross tells NPR. This is particularly true for lotteries.

Matheson explains that the odds of winning a Powerball jackpot have become much longer over the years, due to more number combinations and increased jackpots. The odds of a single ticket have gone from a 1 in 175 million chance to a 1 in 292.2 million chance. This is a great strategy for the lottery, because when people can see how far away it is, they tend to buy more tickets.

Once a winner receives their big windfall, it’s important to avoid going on a spending spree and squandering the money. Instead, it’s wise to hammer out a comprehensive wealth management plan and do some long-term thinking and financial goal-setting. Additionally, the winner must decide how they want to take their prize—a lump sum or annuity—which will affect how quickly it all goes and the amount of taxes they’ll owe.