Rechtshaffen: Gambling can destroy your long-term financial plan

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Building your financial nest egg and putting together a financial plan for your retirement is usually the culmination of many years of work, savings and discipline, but one of the growing destroyers of that hard-earned financial plan is gambling.

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Think about this: almost everyone these days has a casino in their pocket, 24/7, 365 days a year.

Gambling addictions are not new, but the significant growth in online gambling — especially since COVID-19 and the legalization of online gambling in most of Canada — has created a ticking time bomb for an increasing number of families and individuals. This is coupled with the introduction of single-game and single-event wagers in the legal sports betting arena in Canada.

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All this, combined with a massive amount of marketing by gambling sites, means we now have a much larger gambling market than ever before.

This problem may hit your financial plan hard even if you and your partner never gamble. Of particular interest is how a retiring couple can have their predictable financial future torn apart by the gambling debts of their children or even their parents. This may become more common since there has been a significant increase in the number of gamblers under 30, who are using a variety of online betting options.

Total wagers on regulated online gambling in Ontario were 31.7 per cent higher in the second quarter last year than in the same quarter a year earlier, according to iGaming Ontario, which manages the province’s online gaming market.

Of course, numbers can only explain so much. To better understand the personal issues, I spoke with “John,” a 40-something married man with children. He is well-educated and has a solid career and a good income.

For the past year, he has not gambled, but he used to do all his betting online. He did some gambling on news or political outcomes, and then heavily moved into sports betting.

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He also began to bet by using his bank-owned online brokerage. He heavily borrowed on his margin account, bought small-cap companies and cryptocurrencies, and even invested in options trades with extremely short call dates. In hindsight, he doesn’t consider this investing, but gambling.

The risks were high: the trades would either pay off or go bust in the short term, but there were no true investment fundamentals or analysis behind his trades.

John called his gambling “silent.” His spouse couldn’t tell. His work colleagues couldn’t tell. He was gambling during the workday; he was gambling in the early evening; he was gambling in the middle of the night — all on his phone. The silence ended when his losses/debts ultimately topped $1 million.

Outside the personal pain and devastation to those around him, he has a very long road ahead to try to catch up on his financial plan. He could make it, considering his age and income, but many others will never come close to recovering.

From where John currently sits, he has a number of ideas to help minimize the damage for Canadian gamblers. These include some tighter rules on daily gambling limits, banning the use of credit cards to fund gambling and much tighter controls on those under the age of 25. These new rules wouldn’t be just for the many gaming sites, but would extend to the banks and their online brokerage arms.

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The biggest challenge is that it is up to the government in most cases to put these new rules in place. The one problem is that the various levels of government are now some of the country’s largest gaming providers, and they are increasingly dependent on gambling profits to help manage their bloated budgets.

We talk about financial risks when working on financial plans with clients. They usually relate to health problems, lost jobs and divorce. What we rarely talk about is gambling problems and other addictions. The reality is that these are usually the silent financial risks people try to hide from each other. It is understandable, but it feels like the silent risk of gambling is getting a lot worse.

The legal online gambling market in Ontario launched in April 2022. As of Sept. 30, 2024, $72 billion had been wagered over the previous 12 months in the province through the 51 operators with 83 websites with gaming activity, according to the latest statistics from iGaming Ontario.

That number translated into total losses of $2.8 billion for those bettors. But this $2.8-billion loss is only for online gaming from regulated sites in Ontario. It doesn’t include offline betting, such as casinos and racetracks, unregulated betting (including online investment accounts) or the rest of the country. It doesn’t even include online gaming from the government-owned Ontario Lottery and Gaming Corp.

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About 18.9 million, or 64.5 per cent, of Canadians aged 15 or older reported gambling in 2017, according to the 2018 Canadian Community Health Survey of Canadian gambling habits, and 304,400, or 1.6 per cent, of those gamblers were at a moderate-to-severe risk of having problems related to gambling.

For those 300,000-plus, their financial stability is likely at serious risk. Keep in mind that this survey took place before COVID-19 and before the legalization of online gambling. The numbers today are no doubt higher.

As someone who works with families on their financial needs, we look at what will help them today and set a clear picture of their financial future. We know that not every plan will work out for a wide variety of reasons.

My fear is that an increasing reason for failure is related to gambling and that it will get a lot worse before it gets better. My hope is that those who might recognize a potential problem for themselves or a close family member will take action today before their financial future (along with other parts of their lives) becomes irreparably harmed.

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If you or someone close to you has a gambling problem, please reach out to Gamblers Anonymous or talk to your family doctor (if you have one).

Building and maintaining wealth for retirement is hard enough. Don’t let the risks of gambling pull it all down.

Ted Rechtshaffen, MBA, CFP, CIM, is president, portfolio manager and financial planner at TriDelta Private Wealth, a boutique wealth management firm focusing on investment counselling and high-net-worth financial planning. You can contact him at tedr@tridelta.ca.

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