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​What Works Out Better - $1m Now Or $1k A Week For Life?

​What Works Out Better - $1m Now Or $1k A Week For Life?

Canadian teen Charlie Lagarde was given a choice between cashing in a C$1m (US$780,000/£550,000) lump sum or receiving C$1,000 a week

Jess Hardiman

Jess Hardiman

You may have heard about Charlie Lagarde, the Canadian teen who was given a particularly interesting choice after her lottery win - cash in a C$1m (US$780,000/£550,000) lump sum or receive it in installments of C$1,000 a week for the rest of her life.

She'd got really, really lucky, having bought her first scratch card after turning 18, before eventually deciding to take the tax-free weekly payment.

But which was the best option for her? Did she pick wisely?

The BBC decided to ask two financial advisors to find out if she'd made the right choice.

Well, apparently the fact that she's so young means that obviously the weekly installment option would work out pretty well for her. It would take just over 19 years for her to reach a million, and if she lived into her 80s (the Canadian life expectancy is 82, according to World Bank), she would collect more than $3m over the course of her lifetime. Not too shabby, eh?

via GIPHY

"This removes all temptation to spend on things that feel like more of a priority at the age of 18 than they might later in life," Sarah Coles of UK investment company Hargreaves Lansdown told the BBC.

But realistically it's not quite that simplistic - there's a whole host of individual circumstances that could come into play.

Let's say, for argument's sake, that Charlie was in debt or had a mortgage to pay off. Then the lump sum might be looking a bit more attractive.

"If Charlie had racked up debts of $100,000 she might have chosen to take the lump sum and rid herself of the huge associated interest costs. This might be the same if she was paying off a mortgage," said Tom Selby, senior analyst at pensions firm AJ Bell.

But, he added: "Assuming this isn't the case, it appears Charlie has made a very sensible decision."

Okay, so if it's not the case, what about investing the million? Could that have worked out better?

PA

Still nope, according to Selby - who says that however she invested it wouldn't really work in her favour. For instance, if she invested the $1m and withdrew $26k a year, that yearly among would be taxed as income, whereas the weekly prize isn't.

Apparently Largarde's choice isn't uncommon. In a recent survey by Just Group, it turns out many people would prefer the regular income over a stack of cash, the Mirror reports.

Just 37 percent of millennials said they would choose the lump sum, with the majority opting for either pure incomes or a mix of cash and income.

On the other hand, only five percent of the Baby Boomer generation wanted the pure income over a lump sum.

"Younger people have to balance the financial freedom they would get from £1 million now with the security on offer from £1,000 a week for what is likely to be many decades," said Stephen Lowe, group communications director at Just Group.

via GIPHY

"It was clear from the responses to the news reports that many thought her decision was prudent while others thought she was completely bonkers," he added.

Basically, it sounds like Lagarde made the right decision for her personally, but for others it may depend on whether or not they need the money now or later.

Selby added that, whatever you do, the most important thing to do is to take time over making such significant financial decisions.

"If you're lucky enough to be in a position like Charlie, the key is to think about all the factors that affect the value of your money and don't make any rash decisions."

Featured Image Credit: PA

Topics: World News, News, Money, Interesting, Community, Lottery