Monday, March 28, 2011

Black Texans waste 1.1 billion dollars a year

I was recently in Texas for a few days and performed the unpleasant task of sharing some bad news with a packed church on a Saturday morning. Here is what I told them.

In 2005 the University of Texas did a study of the Texas Lottery. That study revealed that 58% of the 2.8 million black Texans play the lottery and that the average monthly lottery expenditure is $58 dollars. (The monthly average for whites is $20.50).

When the math is complete, it becomes depressingly clear that the 1.6 million lottery playing African American Texans are "investing" $684 dollars each a year on lottery tickets. The annual statewide total is $1.1 billion dollars. What the Texas Lottery Commission does not tell these people is that the odds of winning the big prize is 195 million to 1. With theses odds it is reasonable to conclude that these lottery purchases are not investments at all. Rather, they are dollars that could be saved or otherwise productively used being thoughtlessly thrown into a pit that in most instances pays them nothing.

And this is just Texas. And the study was conducted in 2005. By now the numbers have probably increased even as the net worth of African Americans decreases.

The people who place their hopes and their money in the lottery are generally the ones who can least afford to waste or lose money. They are often the targets of so many financial schemes that their marginal economic status is exacerbated by bad choices that they make themselves. And as the economy weakens and people become more desperate, they also become more vulnerable to heavily promoted ripoffs like lotteries that have the blessings and the participation of their government.

A $57 dollar a month lottery habit could easily become a $57 dollar a month savings habit. Anyone who chooses saving money over buying lottery tickets at this same rate would have at least $16 thousand dollars in twenty years from in account that yielded only 2% interest. If the money were invested in a fund that averaged an 8% annual return, they would have at least $32 thousand dollars in 20 years.

Perhaps black Texans will boycott the lottery and lead the way in helping black people rethink how best to use the money that they have. It is not reasonable to complain about what a community lacks when that same community is willing to waste a billion dollars a year.

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