Gamblers, scratchers and their financial education

We develop an online survey to investigate the characteristics of slot/videopoker players and scratchers (individuals buying tickets of scratch-off lotteries). We find evidence of a negative relationship between gambling and financial literacy. More specifically, after controlling for gender, education, income, employment status and area of residence: (1) slot and/or videopoker players have an 8% lower probability of answering correctly to all of the three standard financial education questions; (2) scratch-off players have a 10% lower probability of answering correctly to the (third) mutual fund risk diversification question, (3) a correct answer to all financial education questions raises by 14% the probability of declaring unwillingness to play due to lack of economic convenience. Scratch-off players are as well more impatient and more likely to sacrifice expected value for positive skewness and they overestimate the probability of winning at least the price of the ticket. Our findings suggest that scratchers and slot/videopoker players may be unable to evaluate the overall consequences of gambling on their economic wellbeing due to their lower financial education.