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Transcript

Take the 50k or Flip for a Million? · Making Cents

• 0:01
  Hey, Team Francis here.
• 0:03
  A really interesting question popped up in my inbox a few days ago.
• 0:07
  If I was offered a guaranteed $50,000 or a coin flip, heads I get a million dollars, tails absolutely nothing, which would I take?
• 0:18
  Because the seven Sharp team had asked New Zealanders that exact question and found most of us would rather risk it for the million, even if it meant walking away with nothing.
• 0:30
  That was more risk than other countries that took the same experiment with most people in Britain saying no way, let's just take the guaranteed 50k.
• 0:39
  It's a really interesting experiment in money mentality, risk and reward.
• 0:46
  And I had a lot of thoughts on what this told us.
• 0:49
  So I had a chat with the seven Sharp team about it all, including of course which option I would pick if given the choice.
• 0:56
  They've said I can put that conversation here for you to listen to as well, so enjoy.
• 1:06
  Imagine this.
• 1:07
  You have the choice of instantly receiving $50,000 or flipping a coin for a.
• 1:12
  5050 chance of pocketing 1 million.
• 1:15
  So which would you choose?
• 1:22
  420 is my best offer.
• 1:23
  Ruth.
• 1:24
  Now I have the bag, she's having.
• 1:25
  The bag at $420.
• 1:27
  It's the age old conundrum that was recently put to the test in a UK poll.
• 1:32
  Would you take an instant 50,000 over the chance of 1 million?
• 1:38
  73% of Brits would opt for the 50k compared to a more risk taking 65% of Americans.
• 1:46
  The majority of women also voted in favour of instant cash.
• 1:51
  Those aged between 18 and 24 were more willing to take the bet on 1 million than any other age group, especially when compared to the over 65s.
• 2:03
  So would Kiwis take the money or the bag?
• 2:06
  I'd flip because I think you can barely buy a tank of gas for 50 grand.
• 2:10
  Heads.
• 2:12
  I've watched enough.
• 2:12
  Deal or no deal?
• 2:13
  Just take the money.
• 2:14
  Alright, Alex is going to take 50 grand.
• 2:16
  There we go.
• 2:19
  Heads.
• 2:20
  You want a million?
• 2:21
  I think I might go for the 50,000.
• 2:23
  50,000 is yours.
• 2:25
  This is Monopoly money though.
• 2:27
  But yeah, no, I know, but I.
• 2:28
  Want a real 50,000.
• 2:29
  Oh, no, no, sorry.
• 2:31
  The 50 grand might be the good option.
• 2:32
  Straight up.
• 2:33
  Okay, fair enough.
• 2:34
  Definitely flip the coin.
• 2:37
  We've got heads.
• 2:38
  You want a million bucks?
• 2:39
  I would take the 50,000.
• 2:40
  $50,000.
• 2:41
  Okay, take the coin flop.
• 2:44
  Oh, you would have won a million bucks.
• 2:46
  And we're joined by financial expert Francis Cook.
• 2:49
  Thanks for your time, Francis.
• 2:51
  Firstly, is there a right answer?
• 2:53
  It's one of those things I think it'll come down to where people's own situations are at.
• 2:58
  And it's also, you're really seeing a response here from people in terms of the effect of sudden money.
• 3:06
  So we see this a lot with lottery wins, inheritances, when money just sort of falls out of the sky and into our laps, we do behave differently with it.
• 3:17
  We are more likely to take risks with it because we don't feel like we've got skin in the game.
• 3:22
  So we are a little bit more likely to gamble.
• 3:25
  Whether or not that gamble is a good thing kind of depends on what we're doing with our money elsewhere.
• 3:30
  So, Frances, what does your answer say about you?
• 3:33
  Yeah, I think it tells you a lot.
• 3:35
  If someone is reaching for that guaranteed $50,000, they probably know exactly what it would go towards.
• 3:43
  There's probably a debt that they could do to be without.
• 3:46
  Or it could give them some sort of stability, it could give them some savings, maybe they'd like to be saving up for a house.
• 3:52
  They are probably in a little bit of a pinchy situation where they're needing certainty.
• 3:59
  Meanwhile, if someone's sort of got the basics sorted, then that 1 million then is looking fairly enticing and worth taking a bit of a risk on.
• 4:12
  I mean, $50,000 is lovely, right?
• 4:15
  And I'm sure we could all think of things we'd like to do with that, but it's not necessarily quit your job forever life changing money.
• 4:21
  Whereas a million dollars could be if you invested it in the right places.
• 4:25
  So it probably tells us a lot about people's relationship to money and how much they're needing that certainty and stability in their lives.
• 4:35
  So, for instance, most of the Kiwis we talk to in a very unofficial poll would take the gamble.
• 4:40
  Do you think that shows that we're more risky as a nation?
• 4:45
  Yeah, New Zealanders are funny in terms of our reaction to risk and money.
• 4:50
  We tend to like putting our money into things like term deposits or if we do invest, we often like property rather than shares.
• 5:01
  Meanwhile, we also love to gamble.
• 5:04
  We love a flutter.
• 5:05
  Statista has some research that shows 69% of us gamble at least once a year, sometimes more.
• 5:13
  So we really love a flutter.
• 5:14
  And yet when it comes to the more, you know, the wealth building activities, that might have some risk to them, but they're known risks.
• 5:21
  We get a bit shy of those, which is a little bit backwards really.
• 5:26
  We should be embracing the known risks.
• 5:28
  The things that we see have a solid track record and okay, it's not certain, but it's how you build up wealth and financial stability and some options in life, but instead we sometimes prefer to go put it all
• 5:43
  on red.
• 5:43
  So, Francis, what would you do?
• 5:45
  Well, I think I'd be taking the million dollars if I could.
• 5:47
  I'd be trying for it.
• 5:50
  But that also tells you a little bit about me, right?
• 5:52
  Because I've been doing the personal finance game for a while.
• 5:55
  I am lucky enough not to have any sort of major debts hanging over me.
• 5:59
  I'm not feeling too squeezed.
• 6:00
  I've got those easy wins locked in.
• 6:02
  So I do have that stability.
• 6:04
  That means that I would jump for, hey, let's do a coin flip.
• 6:08
  Nothing risk, nothing gained.
• 6:10
  Let's give it a try.
• 6:11
  And.
• 6:11
  And I think that tells you something about money in general, that it's really worth locking in those easier wins where you can and building in those things that feel small because they're the things that let you take the
• 6:21
  big swings that could pay off big time.
• 6:23
  Thanks for your time, Frances.
• 6:24
  Great to chat with you.
• 6:25
  Thanks for having me.
• 6:27
  This podcast can only give you general information about how things work in most situations.
• 6:32
  It's not individual financial advice.
• 6:34
  If you're after that, a financial advisor is always the best bet.