Does Winning The Lottery Change Your Life?

Question:

What do people actually do with massive lottery wins?

Answer:

According to the American Economic Review, which studied the behaviour of lottery winners in 2001, people’s lives are changed less than you might think by a big win.  On average they saved 16% of their winnings, though this figure rises in the case of really big wins.  The major purchases were, perhaps predictably, houses and cars.  It seems those winning a large amount bought larger houses - but still took out mortgages to do so.  Rather than buying a modest house outright with the cash, they “upsized” their houses. This may tell us something about the mindset of those who gamble - they don’t tend to be conservative in their outlook to life, and don’t like to “play safe” and bank what they already have.   Of course, you have to be prepared to take a chance in order to play a lottery in the first place (”if you are not in it, you can’t win it”).  It is worth remembering the other old adage too, however - “quit while you’re ahead”…

Lottery winners who were paid in regular installments over a 20 year period (as opposed to receiving a one-off payment) saved considerably more as they came to the end of that 20 year period - realising that the good times were coming to an end, and preparing for the day when the payments stopped coming.  Perhaps surprisingly, those over 65 saved just as much as the younger winners.

It seems from the American Economic Review figures that most people, having splurged on a bigger house and newer car, actually continued living much the same life as they did before their win.  Many continued to work in the same jobs, or starting their own businesses, rather than choosing to lie on a beach for the rest of their days.

So perhaps winning big won’t change your life as much as you dream it will?  Still, it would be nice to put it to the test, huh?

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