Winning a jackpot is life transforming. But research shows that it can sometimes end up having a devastating financial impact.
Betting company Betin last week awarded jackpot winner Enock Omweri Ogega Sh20 million, which he won after placing a Sh99 bet.
However, in an unlikely marketing move for a company that thrives on consumers continuously spending money on its platform in order to win, it offered the jackpot winner a financial adviser.
“At Betin we do all we can to ensure our customers play responsibly. Part of this practice involves us offering financial support to customers who win large amounts with us. This forms part of our holistic approach to responsible gaming,” said Betin managing director Leandro Giovando.
“Many lives are changed through wins, and knowing that we are enabling the winners to make smart decisions that will ensure comfort in the long term is important to us.
The financial adviser, therefore, provides professional and experienced guidance on how best to maximise the customer’s new found wealth.”
Indeed, winning a jackpot is life transforming. But research shows that it can sometimes end up having a devastating financial impact, increasing the risk for winners of going bankrupt within five years, compared with those who earn their money progressively.
This is attributed to the unexpected nature of the win, which does not see funds acquired progressively as consumers also learn how to manage their growing financial base, with winnings often considered as income rather than capital and consumers ending up spending frivolously and frequently creating tragedy in their lives.
“It also depends on one’s tendency, how inclined is the consumer to poor expenditure and poor financial management. As an individual if you do not have a good history with financial management then you are destroyed if you win a jackpot,” said Victor Rateng, senior programme officer at Twaweza East Africa, an advocacy research group.
“In most cases, people that win them are usually not in formal employment, they are in casual jobs, which means they live from paycheck to paycheck. So, in such a case, if you give someone Sh5 million or Sh10 million, their most immediate needs will probably be a house and most of the things they have missed out on in their young adult life. So the money just vanishes on extravagant goods.
“But if given to someone who has been working for five to 10 years in the corporate sector, their thinking may be different.
“Although at the end of the day, individual characteristics will determine a lot how one spends such money.”
Mr Ogega, for instance, is a concrete engineer, a casual job and admits to betting continuously, even after suffering losses, in the hope that he would bag the jackpot.
Betin’s move to provide a financial adviser for him could go a long way in ensuring that his win creates a sustainable gain, thereby further supporting consumer understanding of jackpot wins as positive.
In a study conducted in the US on the financial consequences of winning the lottery, the researchers from the University of Kentucky, University of Pittsburgh and Vanderbilt University, found that individuals who receive a large sum of money may engage in mental accounting, treating the money as “house money” and use it to take on additional risks or develop a taste for luxury goods that outlasts the money.
“We investigated the extent to which receiving large lump sums of cash affect bankruptcy in the short- and long-term.
“To distinguish the effect of the transfer from other confounding factors, we compare lottery players who won between $10,000 and $50,000 or between $50,000 and $150,000 to those who won less than $10, 000,” read the research report.
“The results indicate that while the lump-sum payments reduce the probability of bankruptcy in the first two years after winning in an economically and statistically significant way, this reduction is followed by statistically significant increases of similar magnitude three to five years after winning, as individuals may lack the knowledge to handle large lump-sum payments wisely.”
- African Laughter
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
