How Do We Better Financially Empower Ourselves?

How Do We Better Financially Empower Ourselves?

Become Wealth Editor
Kiwi’s Spend More on Lotto Than at All Major Fast-Food Outlets Combined

Kiwis have a spending problem, or perhaps calling it ‘a gambling problem’ more accurately describes it – playing games of chance for money. Annual Lotto sales reached an all-time high of $1.5 billion across Lotto, Strike, Powerball, Keno, Bullseye, and Instant Kiwi in 2021, up nearly nine percent from the year before.

To put things into perspective on just how staggering that figure is – as a nation we spend more on Lotto than we do across our favourite fast-food chains collectively. As the New Zealand Herald reports, McDonald’s sales sat at $259.7 million in 2016 whilst Burger King’s was at $191.5 million (the most recent figures we could locate). The Fast-food giant Restaurant Brands, which owns KFC, Pizza Hutt, Carls Jr and Taco Bell reported revenue of $540.6 million in 2021. Although these figures may deviate for 2022, it’s fair to assume that the rather large gap between Lotto spending and Big Mac’s and Whopper’s will remain.

As a nation we had spent $20.8 billion dollars on Lotto in the 30 years until 2017.

… Yes, you read that right. $20.8 billion dollars.

For perspective, the Christchurch hospital cost $525 million. Kiwis have spent the equivalent of 38 Christchurch hospital rebuilds on the hopes and dreams of winning it big.

The odds aren’t in people's favour when it comes to Lotto. Safer Gambling Aotearoa puts it into perspective; “Lotto NZ explains that if you buy a $7 ticket your odds of winning first division are 1 in 383,838. It's natural to think “Hey, that’s a chance!”, but before you get excited, you should know that our brains aren’t wired to appreciate such low odds, and those are low odds.”

Things are even more dire for a $15 Power Dip Ticket, which come with a 1 in 3,838,380 chance. If you’re still struggling to conceptualise how unlikely that actually is - this fact may help; you are more likely to be killed by a shark in your lifetime than you are to win big on Lotto.

Gambling Nation

New Zealand is a nation of gamblers, consider:

• By the most recent data available, we rank sixth of all countries in per capita gambling losses!  

• Gambling winnings in New Zealand are usually considered tax-free, while in most other developed countries, gambling winnings are considered taxable income

• According to the official Encyclopaedia of New Zealand “Gambling has long been part of the New Zealand way of life.”  

• Casinos operate in every major centre aside from Wellington, there’s even two in Queenstown!

Gambling Icon

City and national landmarks are important, they might also give a hint to who we are as a nation. Think about it: the biggest city in the United States, New York, has the Statue of Liberty. It reflects the city and country’s most important cultural and societal features: hospitality to visitors and immigrants, and, as suggested by its name, freedom. Dubai’s major palm tree development shows us that “anything is possible here”, while the icons of Britain speak to the importance of monarchy and stability: London’s Tower Bridge or Buckingham Palace. The list goes on: Australia’s biggest city has a performance centre – the Sydney Opera House, Christ the Redeemer in Rio de Janerio, Mount Fuji in Tokyo, the Colosseum in Rome, the Eiffel Tower for France, Marina Bay Sands hotel in Singapore, Giza Pyramids in Cairo, the Grand Mosque in Istanbul, Kremlin in Moscow, and so forth. Meanwhile, in New Zealand our biggest city’s most recogniseable icon is a casino!                                                    

Spending Out of Hope

Our love affair with spending on gambling doesn’t appear to be out of triviality. In all likelihood it stems from desperation, or shall we say hope.

History Tells Us All

During the Global Financial Crisis (GFC) of 2008-2009 Kiwis were hit hard with financial pressures. Our unemployment rate rose from 3.9 percent in September 2007 to 6.6 percent in December 2009, as reported by Stats NZ. The housing market also plummeted 15.3 percent, leaving homeowners anxious. One would think that in such dire economic straits, spending $20 on the weekly Lotto ticket would be the first cost to go. What we saw was the opposite. As the GFC hit New Zealand, Lotto sales skyrocketed from roughly $780 million in the 2007/08 financial year to $907 million in 2008/09.

Our more recent economic troubles are still unfolding, though when the data is available it’s nearly certain the same story will repeat – Kiwis would have collectively spent more on lotto during an economic downturn.

A deep dive into where Lotto tickets are more commonly purchased also illuminates the reason for taking a punt with $20 or so. Data from Lotto paints a rather grim picture - just under 70 percent of sales come from areas ranked 6-10 on the Deprivation Index (decile 10 areas being the poorest and decile 1 the wealthiest.) Henderson-Massey was the highest spending region in the country at last count, which also happens to be a decile eight area.

Lotto is a chance for many to escape a cycle of poverty, albeit slimmer than they probably realise. As Selah Hart of Hāpai te Hauora recently said “who doesn't want that when they are stuck in a cycle of poverty and trying to make ends meet for their whānau?"

Financial Empowerment

This brings us to the real issue at hand, how do we empower Kiwis to be more financially literate and in charge of their financial futures? How do we help our children and set up the next generation for success? At Become Wealth our mission is to enable people to create the futures they dream of.

Let’s say you spend $25 a week on Lotto, that’s $1,300 a year. How could you better invest that money into your and your family’s future? Well, here’s four ways.

1. Perform a Financial Health Check

This may be a daunting or downright confusing prospect for some, but thankfully there are many professionals who can help. At Become Wealth we offer a free 30-minute financial health consultation to analyse your income, your goals, your savings rate and what you will likely need later in life.

2. Repay Bad Debts

Repaying bad debts is a no-brainer. Paying interest on ‘bad’ debts – such as credit cards, payday loans, most vehicle loans, and even assorted fees on buy now pay later – all need to be avoided for you to be financially free.

We nearly always advise prioritising a plan to smash that credit card or ute bill down.

3. Invest in Yourself

There a many self-directed financial help tools out there. Books such as The Barefoot Investor by Scott Pape and She’s On the Money by Victoria Devine can provide a comprehensive insight to creating a feasible financial plan and provide greater context on how money really works. There are also an array of low-cost financial courses available that will provide a foundational overview of money management. Check out Future Ready: Money Confidence, Financial Wellbeing | A Pacific Islands perspective and Financial Skills for Life.

Be careful not to overlook your primary area of potential too, which for most people is your ability to earn. Your ability to earn needs to be both:

• Protected, usually through suitable insurance

• Grown, usually through courses (micro and in a traditional sense), formal training, continued professional development, and on-the-job training

4. Invest in Your Future

The concept of investing and compounding interest is shrouded in mysticism for many Kiwis. When you have established a financial plan that leaves you with allocated funds for saving it’s a good idea to invest some of this money. The $1,300 a year you may spend on a Lotto ticket could be $1,300 in a straightforward share-only managed fund or invested directly by you into the share market. A 25-year-old who invested that much into the market each year might have $99,000 by the time they turned 55! And that’s probably on the low side as it’s not even adjusting the contributions up for inflation, and only uses a compound return of 5.5 percent.

A financial planner can help you determine the best way to invest your money, as a diversification of funds is recommended to weather any economic storms. Perhaps you set up some in a fund or use other funds to repay a mortgage. Settling on a great financial plan depends wholly on individual circumstance as it should be tailored to work with your lifestyle.

The Bottom Line: New Zealanders Blow a Whole Lot on Lotto

Next time you’re tempted to spend $25 on that Lotto draw, stop and think – “I’m more likely to be eaten by a shark than see any return on this cash, so how can I achieve what I really want with it?”

It’d be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above. Simply leave your details with us and we’ll be back in touch within a workday.

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