'£50 now or £1,000 in ten years?' poll discussion

banwa

The question isn't 'how much money do you want?'

The question is if someone was offered you a £10 note and said 'you can have this now or you could wait 10 years and you can have £1000', which would you take? Most people would say 'I'll wait, thanks'. But what WOULD you take now (and they won't up their offer if you turn them down;))?

If they were standing there with offering you £250 or to wait, it would make you think twice.

The question is, what's your limit (or minimum)? If someone offered me £500 now or £1000 in 10 years time, I would definitely take the readies.

irishwench69

Hey

I would go for option F, £750 now, factoring in the following:

* Barring disaster(!) I'm very likely to be around in 10 years time (and more )
* I would invest it, and even balancing inflation against savings rates, I think I could get more than £1,000 in 10 years time.

I'm sure there are some who'd go for the £750 for instant gratification, I just think I could get more over the ten year period! If it was £250 or less, it's less likely.

£500 is possibly on the line (especially if you went for the longer term game of index linked trackers or some sort of investment (or even putting it in as a payment into your pension fund!) rather than cash based savings accounts......)

IW x

King_Weasel

The way the question is phrased ("guarantee" etc) is intended to take risk - or some risk - out of the equation, this being one of the factors that might make you even prefer £10 now, in the circumstance described above by banwa, for instance.

But it still leaves inflation, so people might have different answers purely because they have different views of how fast prices will rise over the next decade. People who think in terms of the return on investing the money are implicitly making an assumption about inflation, since this is the predominant influence on the % return. This might have been removed by making the £1000 index-linked.

We would then be left with "pure" time preference (ie the value placed on a reward now compared with one in the future) plus the value placed on choice (ie the value placed on the possibility of spending the money at some point in the next ten years). The offer of a bowl of fruit now or a larger one in 10 years time would remove the choice element while retaining the time preference element.

Hope you're all clear now.

Rothschild

Id take the £250 now.

Could buy a cool piece of furniture with it and have that to show off for the next 10years.



In 10years time id probably have forgotten about that i was owed £1,000 and would have wasted 10years of going without something just for £750 extra. (1/3 of 1 single months pay).

ixwood

Interesting responses. It's the need for immediate gratification that keeps poor people poor.

It's almost like asking whether people would take a loan (and get less in the future for more now), which a lot of people would/do.

DeepBlue_2

I agree that it isn't clear what the scenario is. My understanding is: given the choice, would you choose A or G? If G, what about B or G? If still G, what about C or G etc? i.e. what is the minimum amount that you would accept in preference to a guaranteed £1000 in the future.

I suspect that many people are reading it as: would you prefer £10 or £750 now (or any other intermediate option). Having made that choice, would you keep your current choice or take £1000 in 10 years?

For most, it seems less about the need for money now or later, and more about a calculation of compound interest. I don't need the money now, and so my decision is how low can I go and still make the now money grow to more than £1000 in 10 years. £500 in a well performing pension fund (for a higher rate tax payer) would probably do it comfortably.

If the question is "how desperate is the average person for money now (and how many can wait, if the return is higher)?" then the Now options should have stopped at £200....

grumpyoldwoman

I based my choice on how likely I am to be here in 10 years, and how much £1000 then would be worth now. I figured it would be worth about £750 now, but, as I have to pick the minimum I would want now rather than having to wait, I plumped for £500.

I know I'd be losing out slightly but you can't have your cake and eat it, can you? It's like those competitions that offer you a lump sum now (say £20000) or a small amount (say £2000) every year for the rest of your life. If you're young and healthy then picking the small amount every year for life would work out better, but if you're in your 60's with health problems then the lump sum would be a better option.

newjustine

Based on this information, I'd be very happy to take £150 now - but how likely are the other immediately-available options?
This kind of choice has been researched by an academic, Professor Frank Hartmann at Rotterdam School of Management, Erasmus University in the Netherlands. He applied it to the matter of banker's bonuses. Would bankers prefer to take a bonus now, or would they be prepared to hold out for a maturing bonus? The theory was also recently tested by a TV programme here in the Netherlands, who put one of their reporters out on the street to run an experiment, offering passers-by a probable chance of a small amount of cash immediately, or a lesser chance of a larger amount of cash at some point in the future.
I'm told there'll be English subtitles on the TV clip later in the week - it's worth watching when they're there, because it gives an insight into our motivations for reward and how easily we're tempted by an unrealistic prospect!
The TV piece takes the first seven minutes of a programme called Nieuwslicht on TV channel Vara. As a new poster (but a seasoned reader) on these pages, I'm not allowed to post links yet - but search for news about Frank Hartmann at Rotterdam School of Management and you should find it.

Sooler

I think the results skewed to £750 show how many people vote with their eyes rather than their head :rotfl:

earthmother

A lump sum guaranteed a few years down the road would be nice, but for my situation (small children, debt, benefit income), a cash injection, of any amount, right now is preferable, so I voted for £250 (although thinking about it, less would be just as welcome as more).

£250 right now would clear a smaller creditor, make the summer holidays more interesting for the kids, or even pay for next years school uniforms. £1000 in 10 years would make their transitions to college easier, but would still get swallowed up somewhere in the end, and if I can clear creditors now, I'm just as likely to be able to save that sort of amount by then myself.