Would you go for short term cash? Poll Discussion

Former_MSE_Lawrence · 18 June 2007 at 3:26PM

Would you go for short term cash? Imagine you've just won a bank's competition (hopefully without having to dial a premium rate!). You're offered a choice of prizes all with a cast iron guarantee that it'll be paid out. Which of the following options would you pick?

£10,000 in cash now
£15,000 paid to you in 6 months
£20,000 in a year
£40,000 in five years
£10,0000 in ten years

Please vote here or click reply to discuss.

Chef1980uk · 19 June 2007 at 10:42AM

Voted £100k in ten years. Would mean i didn't have to worry about my current debt and could get in to more debt knowing i will pay it all off in 10 years time. I'm guessing that is not the right attitude towards being in debt though

jshelagh · 19 June 2007 at 2:45PM

It depends on you age and state of health. I am 74 and do not expect to be around in 10 years

Gemmzie · 19 June 2007 at 4:04PM

C.

Strikes a balance. £20k will still be worth £19,400 in today's money in a year's time.

The higher amount will be worth far less. This is a bank remember! They are sneaky, it'll be at today's worth

MSE_Martin · 19 June 2007 at 4:52PM

Apologies there was an error in the first post - all posts discussing that have been deleted (the last option said £10,000 in ten years by mistake)

wiggers · 19 June 2007 at 5:06PM

Here is my calculation of the interest rate you'd have to invest the original £10k at in order to match the equivalent prize money, ignoring inflation:

£10,000 in cash now - 0%
£15,000 paid to you in 6 months - 125% per annum
£20,000 in a year - 100% pa
£40,000 in five years - 31% pa
£100,000 in ten years - 25% pa

I reckon a 6month wait is the best deal.

Gordon_the_Moron · 19 June 2007 at 5:16PM

Yes the 6 month wait provides the best APR but then what do you do with it then to make the £15000 guaranteed, without risk, to be worth £100,000 in another 9 and a half years time?

Da Moron

wiggers · 19 June 2007 at 5:29PM

Well, you'd only have to invest at 22% to match it! But if you include inflation at say 5% then you'd only need to invest at 20%. So, maybe the 10yr wait would be easier than playing the stock market to get the same return.

Tils · 19 June 2007 at 5:48PM

Personally I went for the £20,000 in a year. the 10k theres no way you could double your money in 1 year...and increase that 15k by 5 more k in 6 months I doubt is possible either.

100k in 10 years for me is just too long and the 40k in 5 years is also too long I think

So anyway £20,000 in a year for me :P

quickstepqueen · 19 June 2007 at 5:52PM

I picked 6 months wait. Don't have any debts but anything could happen in 6 mths...marriage, kids, house so knowing I'd have a little to come would be great. If I don't need £15k straight away can just stick it in an acct accruing interest. The £15k is just free money so it's all welcome.

wiggers · 19 June 2007 at 6:35PM

I've done a few more calcs and it looks intriguing. Assuming you don't need the money for 10yrs and inflation is 5% then, if you can invest at a minimum of 18.6%, you'd be better off with the 20k at 1yr. Next best option is the 40k at 5 yrs (required reinvestment at 19.1%) then my original choice of 15k at 6 months (21%). Of course the safest bet is still the 100k in 10yrs, which will be worth about 60k in today's money.

Would you go for short term cash? Poll Discussion

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