960,000 euros for a 20-year-old: lessons in money management
A 20-year-old receives €960,000 from El Gordo, Spain's Christmas lottery. Splurge or fixed income: the debate dividing analysts.
English · Original discussion in Spanish · Published
A million at 20: the lottery as a financial test
A former student has won a million euros in the December draw. After taxes, the amount comes to 960,000 euros. At 20, that sum can be an opportunity or a curse: history is full of cases of winners who end up broke.
The splurging pattern
Those who have seen too many overnight success stories don't give much for his chances. Sports cars, parties and bad company are the most predictable script. The pessimism is backed by data: most lottery winners squander their fortune in less than five years. There is no official study, but the accumulated evidence is overwhelming.
The fixed-income route
Against that current, there is the fixed-income option. A case close to the debate: a person who received 600,000 euros put it into bond funds and gets 1,500 euros a month. That return, around 3% a year, allows a living without working, though with prudence. With 960,000 euros, the figure would be roughly 2,400 euros a month, enough to never worry about a salary again.
The question is whether a twenty-year-old with no financial education will choose the income statement or the current account. Most choose the latter, and the analysts who predicted bankruptcy seem set to be right. But if the young man takes the advice to invest, he will have given a lesson in economics superior to that of many professionals.
Time will tell. The lottery only gives money; what you do with it is another story.
A former student has won a million euros in the December draw. After taxes, the amount comes to 960,000 euros. At 20, that sum can be an opportunity or a curse: history is full of cases of winners who end up broke.
The splurging pattern
Those who have seen too many overnight success stories don't give much for his chances. Sports cars, parties and bad company are the most predictable script. The pessimism is backed by data: most lottery winners squander their fortune in less than five years. There is no official study, but the accumulated evidence is overwhelming.
The fixed-income route
Against that current, there is the fixed-income option. A case close to the debate: a person who received 600,000 euros put it into bond funds and gets 1,500 euros a month. That return, around 3% a year, allows a living without working, though with prudence. With 960,000 euros, the figure would be roughly 2,400 euros a month, enough to never worry about a salary again.
The question is whether a twenty-year-old with no financial education will choose the income statement or the current account. Most choose the latter, and the analysts who predicted bankruptcy seem set to be right. But if the young man takes the advice to invest, he will have given a lesson in economics superior to that of many professionals.
Time will tell. The lottery only gives money; what you do with it is another story.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (18 replies).
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