Wednesday, December 28, 2016

Play the lotto or have a kid?

A few years back I had a funny thought.  If you put all the money it would take into raising a child into the lotto instead, would your odds of being financially set for life be better?  My last post's thought experiment reminded me of this thought experiment I did years ago and decided to re-crunch the numbers.

Obviously, there's a set of ridiculous assumptions here.  The most ridiculous assumption is that the probability of any child becoming rich is the same across all people.  This is a horrible assumption in reality of course.  Also will a rich child actually take care of you?  Oh well, this is just a silly thought experiment.

Another assumption we need to make is how rich is rich?  Lets look at someone with a net worth of $100 million dollars.  There's never been a billion dollar Lotto payout but there have been multiple hundred million dollar payouts, so lets just go with this number.

The odds of winning the Powerball jackpot are 1 in 292,201,338.

Based on the most recent census, the U.S. population is about 309 million.  According to a recent Forbes article, there are approximately 5000 hectomillionaire households in the U.S.  Now "household" is different than "people", but we'll go with this number as it's the best one I can find.

Based on these numbers, the odds of a person becoming a hectomillionare is about 1 out of every 61,800 people.

Using the default inputs on a cost of raising a child calculator I found online, it'll cost about $191,000 dollars to raise a child and not send them to college.  If you put all that money into Powerball, you have about a 1 in 3059 chance of winning ($2 for a ticket).

So if you wanna be rich, play the lotto instead of having a kid!

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