More than 20 percent of Americans believe that a winning lottery ticket is the best way to get rich, according to a Reuter’s article. MSN.com reports that about 50 percent of adults spend approximately $45 billion annually in the pursuit of lottery winnings, and the vast majority ends up with nothing to show for it.
Play a Better Game
Thankfully, most Americans realize that there is a better game out there when it comes to building wealth. The game is called compounding, and the sooner you get started, the better chance you have to win.
Here is a simple example: Say a 30-year-old lottery player shells out about $10 per week on tickets. If she decided to invest the money instead each year in an account earning a hypothetical 8 percent rate of return, she would accumulate $100,315 before taxes by age 65. Her total out-of-pocket contribution to the pot would have been $18,200, and the rest would have been the product of compounded accumulation.
This hypothetical example is used for illustrative purposes only and does not represent any specific investment. Taxes and investment fees were not considered. Rates of return will vary over time, particularly for long-term investments. Actual results will vary.
We’ve all heard the saying; “the rich get richer.” But with compounding, those who save create the potential to get richer, regardless of their financial situation. That’s because money invested today and left alone can build on itself over time as contributions earn an annual return. The longer money is invested, the more potential growth is possible.
The lure of a multimillion-dollar jackpot could tempt just about anyone to try his or her luck at the lottery. But investors who are willing to commit themselves to the time-tested practice of compounding may receive a much better payoff in the end.