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, Monday, January 12, 2015

Across the United States, it is not uncommon to see billboards and advertisements for a local lottery. These are often joined by other joint lotteries, some of which cover several states. While the variety is seemingly endless, all the ads and sponsorships of the games share one trait: a warning. Often found in the fine print of a ticket or displayed along the bottom of a massive billboard, some variation of the following wording is included by the organizations running the lotteries: “Not to be used for investment, retirement or savings purposes.”

These warnings hardly seem necessary. The odds of winning big at the lottery are one in tens of thousands, often millions. And yet, people keep purchasing tickets and entries, especially the poor. Nationally, according to a survey from the Consumer Federation of America, 21 percent of Americans believe the lottery is the most effective and practical strategy to accumulate several hundred thousand dollars. This percentage jumps to 38 percent for low-income respondents.

Herein lies one of the most difficult problems facing anyone concerned with poverty alleviation: a lack of basic financial literacy. Whether it relates to wealth accumulation, credit-card debt, or simply saving money for a rainy day, financial literacy around the globe is remarkably low.

A Harvard study in 2007 found that 40 percent of American credit-card holders do not pay the full amount due each month despite exorbitant interest rates. Similarly, a survey in England found that one-quarter of adults did not realize that pensions were often invested in the stock market.

This lack of knowledge has serious repercussions for programs, especially those aimed at breaking the devastating cyclical poverty that is all too common in inner cities as well as poor rural regions. Without the proper accompanying financial literacy, all the money in the world will not solve the plight of those families caught in the cycle of poverty. Thankfully, the problem of financial illiteracy is gaining more attention worldwide, leading to new efforts and organizations stepping forward to help those in need.

One of the most successful and well-known organizations is the nonprofit Operation HOPE. Founded in 1992 after the Rodney King riots in Los Angeles, Operation HOPE’s stated goal is to “make free enterprise work for everyone,” especially focusing on the working poor and the struggling middle class. Its main weapon of choice in this fight for those in need: financial literacy.

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