Probability is the chance that something might happen. When you calculate
the probability of an event you look at chances of getting what you
want versus all the possible things that can happen. The probability
of an event that you know for sure will happen is 100% or 1 while
the probability of an event that will never happen is 0% or just plain
What about other events that you're not so sure about? The probability
of these events can be given as a percent or as an odds ratio. Let's
pick something a little silly but simple as an example. Let's pretend
that you want to wear a sweater to school and you have a blue sweater
and a yellow sweater. The probability of wearing the blue sweater
is 50% or the odds are 1 out of 2. What is the probability of wearing
the yellow sweater? It would be the same. The probability of all the
events that are possible must add up to 100%.
There are lots of these simple examples that we could use to discuss
more about probability. But this time we want to talk about Events
Important in Life. As you grow up you need to think about your actions
and what the consequences of these actions will be. It's important
to know how to use probability when you make decisions about your
future. Probability is a whole lot more than just selecting blue sweaters
or blue socks from the drawer.
A lot of people just wish that they could win the lottery as a way
to solve all their financial stresses. In fact about one-third of
the adults in the United States think that winning the lottery is
the best way to become financially secure. But you have a better chance
of being struck by lightening or being in a plane crash (and there
really aren't very many plane crashes) than you have of winning the
lottery. The probability of winning the lottery is very close to 0.
You need a better plan for your financial future than the lottery!
When you consider probability and your money, you decide how much
risk you want to take. The government says that you will get back
your money if the bank itself has financial trouble. If you put money
in a bank that is insured by the federal government and you don't
exceed the maximum insured amount, the probability of losing your
money is 0. But banks usually do not pay very much interest back to
you on your savings. You have low risk and low rate of return.
You've seen lots of ads on TV for trading stocks which means
buying and selling stock in companies. Before buying a stock you need
to investigate about the company. If the company makes a lot of money
with their product and if you own some of their stock you may make
more money too, potentially more money than what you could earn at
the bank. But if the company loses money, you may lose too. People
who work with company finances calculate the probability that a company
should make money and are a good company to invest money in.
Another area of your life where probability is important is your
health. For example, if you know that people in your family have heart
disease and you develop high blood pressure when you are an adult
then you know that you have a high probability of also having heart
disease. You could be frightened by this high probability or you could
live a healthier lifestyle that lowers your blood pressure and in
turn lowers the probability of getting heart disease. In this case,
you are using your understanding of probability to improve your health.