## Wednesday, October 24, 2012

### Million Dollar Lottery: Math Lessons and More!

What would you do if you won a million dollars in a lottery? The NC Education Lottery offers winners a choice between the entire amount paid over 20 years, or a lump sum payout of a smaller amount. What are the implications of each choice?

You might be wondering why I even asked the question, so let me explain. Today I saw a news article in the paper about a local man, James Anderson, who won \$1 million in the Holiday Millions lottery game. One part of the story really captured my interest. In fact, when I read this part of the article, my teacher brain went into overdrive!
"Top prize winners in the Holiday Millions game have the option of claiming their prize as a 20-year annuity or a lump sum. Anderson chose the \$600,000 lump sum, which left him with \$408,006 after taxes."
Do you realize that by accepting \$600,000, Mr. Anderson gave up \$400,000 of his payout just so he could get the money now instead of spreading it over 20 years? Furthermore, the government took such a big chunk that he now has less than half of that million dollars.

Million Dollar Lottery Lessons
As I read this, I immediately saw all kinds of possibilities for million dollar lottery lessons. There are loads of obvious math lesson ideas, but I can also see many opportunities for literacy lessons as well. Here are a few quick thoughts about where you could go with this topic. Please share your ideas, too!
• Read informational text.  Begin by having students read the article. You can find the article online here on the Fayetteville Observer website.  Then ask them to complete a "What's the Scoop?" graphic organizer to uncover the important facts and details in the news story. You could also use the Current Event Report form in my Social Studies file cabinet to have students write a summary of the important information.
• Analyze the math involved in Mr. Anderson's decision. What exactly did it mean in financial terms to take \$600,000 now instead of a million paid over 20 years? I called the lottery hotline to make sure I understood how the 20-year annuity worked, and it's basically an option for taking out 1/20th of the money each year for 20 years. So how much money did Mr. Anderson give up? If you received a million dollars in annual payments over 20 years, how much would you get each year? What would that be on a monthly basis? What is the average salary in America? Would you be rich, living comfortably, or just getting by?
• Debate the pros and cons of the two payout options. Even though he gave up \$400,000 to take out the immediate lump sum of \$600,000, it might actually not be such a bad deal if he invests the money wisely. Disregard taxes because taxes will have to be paid on the money either way, and consider what would happen if he invested the full \$600,000. What interest rate would be needed to make that money grow to \$1 million in 20 years? As a side note, the person I spoke with on the lottery hotline said that the last 5 jackpot winners all took the lump sum payout. I'm assuming they contacted a financial adviser before making that decision, so it may be that taking the lump sum is a better option. But what if you took the money and just spent it? Would you be able to invest it?
• Explore probability - Discuss the probability of winning money in the Holiday Millions game. You can read more about this particular game on the Holiday Millions page of the NC Education Lottery website. Players can win different amounts; what is the probability of winning each amount? (Click here to download a chart showing the approximate odds of winning.) A lottery ticket costs \$20. Look at the odds of winning a million dollars. What if you bought a ticket every day for a year? How much would you spend? How much would you improve your chances of winning?
• Research possible purchases. What can you buy with \$408,000 (the amount after taxes)? Research the cost of a home in your area, the cost of a new car, a dream vacation, etc.
• Discuss the concept of a million. Read the book How Much is a Million, written by David Schwartz and illustrated by Steven Kellogg. Use the ideas in the book as a springboard for discussing just how big a million really is.
• Discuss impact of winning a \$1 million. How would your life change? Are people with more money happier? What problems might be caused by winning a lot of money? Would people treat you differently? (I've heard that many people who win large sums of money end up broke and unhappy in a few years. It would be interesting to research the facts on this and discuss your findings with your students.)
• Write an expository paragraph or paper - What would you do if you won a \$1 million and had a choice between taking a lump sum of \$600,000 or the whole amount over 20 years? How might your life change based on your decision?
These are just a few lesson ideas that came to mind as I thought about the implications of winning \$1 million dollars. How would you teach a million dollar lottery lesson? I think we can agree that this topic is a goldmine of rich learning opportunities, no pun intended!