I agree with your main claim about the value of mathematical literacy, but your example is terrible. It's not really about math at all. It seems to be about decision making and many people's tendency to choose very faint hopes, no matter how well they understand (on some level) that the odds are massively against them. I very much doubt that's about math per se. That is, your relative didn't misunderstand how little 99.5 leaves from 100. She simply isn't a logical machine.
tl;dr What a person recognizes and what a person acts on are not always the same.
How high are you setting the bar on "numerate person"?
People make terrible choices all the time despite knowing and understanding all sorts of things (math, health risks, harm they may cause themselves or others) because they have emotions and because weakness of will is a real phenomenon. You seem to be completely discounting all other considerations except "understanding the numbers".
I edited this about twenty times. I suspect we have radically different views of human psychology and how knowledge affects choice. Might be interesting to discuss over a beer, but here only a distraction from the larger issue in the article. Apologies.
Not a lot? As odds in a lottery that pays millions to the winner (original remark said thousands/millions, but that 'thousands' would seem less than the <15K that the 99.5 would get) and still pays out to everybody, it looks incredibly enticing.
The lie with these kinds of things is not as much in those percentages as it is that it is not a lottery. There are people who can sell anything; they are the winners. Also, typically, there is some kind of pyramid scheme involved. You get stats on the early birds, but you cannot become an early bird yourself.
When you talking income, you don't want high risk/high payout, because your going to have serious cash flow problems, if you don't win, which the most likely case.
A small chance of winning, but with otherwise serious cash problems? Or high probability of a nice stable income?
I know what I would choose, too, but I have an income. The target for such schemes is people who don't have that, or have a really low one. For them, the options look like "about what I get now, and I can choose my own working hours, and no longer have to listen to a boss" and "bingo".
And that likely is true. If you choose any 20 hours to work each day, 7 days a week and have some talent for sales, you likely will make that 15K.
tl;dr What a person recognizes and what a person acts on are not always the same.