As the financially distressed lose hope, more turn to gambling

Friday, 13 December 2024

If tonight's powerball prize goes to a single ticket holder, they will take the number one spot.

Sasha Lockley is the CEO and co-founder of Money Sweetspot, a social enterprise fintech lender, and is actively involved in the not for profit sector including as chair of Thriving Communities Aotearoa.

OPINION: Government funding cuts have hit financial support services hard, and as a result, the financially distressed are being pushed further into debt.

Earlier this year, around a third of free budgeting services lost Ministry of Social Development funding, while others have had funding reduced.

Meanwhile, demand for budgeting education and debt management tools continue to skyrocket. New Zealand’s household debt to income ratio is approximate 165% in 2024, indicating that the average household owes 1.65 times its annual disposable income.

Yet, when you work with some of the most financially distressed people in New Zealand and hear their stories, it’s not even the money they’re desperate for, they’re actually just desperate for hope, desperate for a reset.

One thing that’s becoming more and more prominent in my work at Money Sweetspot is the false hope that gambling provides the financially vulnerable.

The TAB’s reporting on its income suggests gambling is booming in New Zealand, writes Sasha Lockley.

The number of people we can’t help because they are gambling such a significant proportion of their income is concerning, and it’s evident they’re relying on the golden-ticket psychology that gambling offers.

While a lack of affordability remains the highest reason for declining applications for a financial reset, we’ve seen a significant increase in the level of gambling expenditure across the board. Applications where people are spending more than 30% of their income on gambling used to be rare, but we now see them every week.

Due to gambling debt being so prominent in the applications we’re receiving we’ve had to create specific guidance around gambling in loan application processes.

The common feedback we hear is that gambling is their mechanism to feel some hope. It’s heartbreaking.

A key part of our approach is to offer referrals to appropriate community support, whether that be for budgeting, addiction, or family services. But with a reduction in funding for many of those services, the reality is that there are fewer places and less capacity to help.

Gambling is often cited by those at the end of their financial tether as offering some desperately needed hope, writes Sasha Lockley.

Our people are struggling, and yet those who seek to capitalise off those looking for financial freedom are thriving.

TAB’s 2023 annual report suggests the gambling industry is booming, its gaming income seeing a 21% increase from 2022 to 2023, and online betting accounting for 80% of all bets.

Just last month, on its largest day of the year (Melbourne Cup day), the TAB predicted up to $30 million was to be gambled by New Zealand punters and in the 10 minutes before the race started, almost 7000 bets were being processed each minute.

Yet concerns have risen around New Zealand being one of very few developed countries to not regulate online gambling, meaning we’re aggressively targeted by offshore operators. Plus, legalising online casinos will only deepen the sinkhole for those already stretched.

When the prize is at its biggest, the demand for Lotto tickets soars.

At Money Sweetspot, we’re seeing more men in their early 20s applying for loans due to gambling and it’s not hard to see how they’ve gotten into the position they’re in.

Males are generally more willing to take risks with finances, and because of this, young men are heavily targeted with ads across sports and gaming platforms.

Dr Marc Wilson of Victoria University talked earlier this year about people’s tendency to spend up on Lotto tickets when the prize is larger, even if they have higher probabilities of winning a smaller prize.

It’s the drawcard of a big dollar amount that gives people the false hope of change. How often do you hear “winning Lotto would allow me to…”. “Allow” implies we don’t currently have that option.

What we need is a nation that introduces a new narrative towards debt, one that isn’t infused with shame. From there, we need a government that backs sufficient resources for a financial reset to show those in debt they don’t need to wait for a golden ticket.

For so many, the chance to win is currently the only hope they have left.

The most common thing we see across our customers is a lack of access or understanding of financial data. People often don’t know how much they’re spending, so when we highlight where their pay is going, they can become quite shocked and upset.

These are intelligent, capable people who are being trapped by the cunning marketing of lotteries and gambling services, but also the ease of online-betting services. It’s so gamified it doesn’t even feel like you’re spending real money.

One of the most powerful ways to start regaining control of your finances is to track them. You can’t change the narrative of your finances until you know the current story.

But lenders, banks and other financial institutions are equally responsible for offering tangible hope to the many that need it.

As we approach what we’ve coined “silly-spending season” this is a reminder to us all, we are a nation in financial distress. But, as you enter a new year, it’s the perfect opportunity for a financial reset and there are still services out there who don’t want to take anything from you, but simply want to give you back some hope.