Don’t bet on charity-run lotteries

Supporting the charity directly is a more cost-effective way to give

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From the December 2015 issue of the magazine.

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Typically, only a small portion of the funds raised by these lotteries ends up supporting charitable programs. The numbers tell the story. More than 20 of the largest 100 charities in Canada run lotteries, but half of them fail to get a 50% return on their investment. That’s lousy.

Several charity-run lotteries don’t even fare that well. The Heart and Stroke Foundation, for instance, spends $54 million to run its annual lottery, but only adds $9 million to its coffers after expenses. The return? A measly 18%. Why? Because despite what you may think, charities have to pay up front for all of those luxury homes and exotic cars they give away as prizes. Plus, they have to pay for marketing and administrative costs to make them successful.

So while the odds on these lotteries may be slightly better than what you might get from a ticket bought at your local convenience store, you’re still just gambling and there’s no certainty you’ll walk away with anything in the end. But there is some good news. If you support the organization directly, your odds of getting a tax credit are 100%. Not only is it better for you, it’s also better for the charity since it is a more cost-effective way to give. If you want to buy a charity lottery ticket for fun, go right ahead, just don’t overweight it as part of your charitable giving plan.

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