Would you go for short term cash? Poll Discussion 18 June 2007 at 3:26PM in MoneySaving polls 39 replies 8.1K views

Former_MSE_Lawrence

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

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

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

Gemmzie

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

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

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

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

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

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

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

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.