6th June 2014 at 8:34am
If you’re reading this having taken part in our light hearted quiz, “What type of lottery winner are you?” you’ll have seen that the way people behave when it comes to money can vary dramatically. Focusing on an absurdly large injection of cash into your bank account is a great way to reveal your money personality.
You might be a Tenacious Treasurer, managing your new-found wealth with care. Perhaps you’re a Flush Free Spirit, spending with abandon or maybe you are someone who builds on your new found wealth, invest it and reinvent yourself as a Filthy Rich Tycoon.
Viv Nicholson is perhaps the UK’s most famous big money winner. Famously she announced “I’m going to spend, spend, spend.” to the assembled press after her husband Keith scooped £152,319 (equivalent to £2.87m today) with 8 score draws on the football pools in 1961, thereby establishing the default perception of how jackpot winners react.
50 years, five husbands and a spent fortune later, Viv has settled down back in her home town of Castleford, Yorkshire. She’s an active charity fundraiser and you can read her fascinating story here.
Of course, this £2.87m equivalent pales into significance compared
the evidence is conflicting as to whether sudden wealth fundamentally changes our behaviour or not, or whether it even makes us happy. to some of the jackpots that have been scooped since the National Lottery came into existence.
Viv was perceived as the perfect, and very public, illustration of how winning lots and lots of money changes some people’s personality completely. But did it? And would we all react in the same way?
Let’s find out.
Windfalls can change your circumstances; although for most of us windfalls are unlikely to come in the form of a lottery win, it’s much more likely to be a significant, possibly even life-changing, family inheritance.
Whatever the reason for these changes, the evidence is conflicting as to whether sudden wealth fundamentally changes our behaviour or not, or whether it even makes us happy. One researcher from Warwick and another from Minnesota agree that when people earn more than £22,000 or $36,000 annually we apparently really do get less contented, not more.
And the Beatles probably got it right when they sang “Money can’t by me love.”
There’s evidence that it’s our pre-programmed natural traits that kick in, in the event of financial extremes such as sudden windfalls. Some argue it’s this genetic wiring that determines our response
There’s evidence that it’s our pre-programmed natural traits that kick in, in the event of financial extremes such as sudden windfalls. Some argue it’s this genetic wiring that determines our response – we’re simply reacting in the same way that we deal with money on an ongoing basis; there’s just a lot more of it.
So, the natural saver in us simply dramatically increases their stockpile. The spender goes on an almighty spending frenzy of unrestrained buying.
A study by H. Roy Kaplan Ph.D of 576 US Lottery winners showed that people with psychologically and financially rewarding jobs continued working regardless of the amount they won, while people who worked in low paying, semi-skilled and unskilled jobs were far more likely to quit following a big win. Does this debunk the nature argument and suggest it’s nurture that’s influencing our reaction? In other words, is it our circumstances, at the time of our windfall, not our inherent personality, that determines how we react to it?
The same study found that, contrary to popular belief, winners don’t typically ‘spend, spend, spend’ but, rather, give large amounts of their winnings to their children and to charity.
Rather boringly perhaps most spent their winnings on houses, cars and holidays. And, overall, winners are well-adjusted, secure and generally happy as a result of the experience. In fact, our recent study showed only 3% of Brits would ‘spend, spend, spend’ if they found themselves winning a Lottery jackpot.
The evidence conflicts for sure so maybe the only way to find out how you’ll react, if you haven’t already done so, is to take part yourself in our quiz. It might not be the final say in psychological research, but it’s great fun all the same.
Recognising the challenge of “Saving Smart” for long-term savings such as in a pension or ISA is important, here are top tips from Standard Life:
- Don’t delay. The earlier you start investing for your future, the more chance your money has to grow. If you are concerned about locking your money into a pension until you reach age 55, then consider tax efficient ISAs in the meantime.
- Don’t miss out on free money. If you’re employed, chances are you’ve been auto-enrolled in a pension. Take advantage of any employer contributions and the generous tax benefits from the government, too.
- Always hold some money in cash to cover your outgoings (such as your rent, mortgage, food and utilities) and in case of emergencies, before looking to invest for the longer term.
- Avoid letting your savings lose real value. Check the interest rates you are getting against best buy tables to see if you can beat inflation. Consider tax efficient options such as a Stocks & Shares ISA for surplus cash, which has the potential for long term growth in the stock market. Seek independent financial advice if you need help getting started.
- If you are dipping your toe in the stock market for the first time, then you may want to seek guidance when it comes to choosing which funds to invest in – the Money Advice Service is a good starting point.
For more information on savings and investments check out our website here.
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This blog and any responses to comments are not financial advice.