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It’s a one-off 2k check. You cannot do financial planning or anything. Maybe you can get some new clothes or few other necessities but it cannot change the cou

It’s a one-off 2k check. You cannot do financial planning or anything. Maybe you can get some new clothes or few other necessities but it cannot change the course of your life. You might get better return if you just go to a casino and bet it all on red. I don’t understand why the researchers thought that this was unexpected result. Now if they had offered 2k per month for life to these impoverished individuals, then this is where I anticipate to see a step change in their quality of life .

londons_explore 4y ago
It's possible to convert a one-off payment into a lifetime regular payment. Simply invest the 5K and take out regular installments whose size is calculated based on your expected lifespan. Or buy an annuity. I frequently do that when presented with a lump sum of money - although few others seem to.
- behrlich 4y ago
  Using the 4% rule on $5k, your monthly payment would be $16 / month. The 4% rule is generally used for an on time retirement, so there’s no reason to believe you’d be able to maintain your $16 / month payment in perpetuity. I don’t think $16 a month is going to change their lives any more than buying necessities they need now with the $5k, but I guess we’d need another study for that :)
- mattkrause 4y ago
  If all you’ve got is $5000, that “endowment” still isn’t going to remake your life. Perpetual endowments usually spend about 5% of their market value per year, so you would receive about $20/month. Not nothing, but not life-changing either. Since you’re not going to live forever, you could draw a bit faster—-but transaction costs are also going to eat into that too.
- whatever1 4y ago
  Let do the math. 5k for 20 years with average 6% annual return on investments and 3% annual withdrawals (~$200 per year or less than $20 per month). With 0% inflation over 20 years, this will yield you $9000 (in 2042 dollars). The inflation this year is above 5%, and if this trend continues for long, your investment will pretty much evaporate slowly.
dash2 4y ago
They thought it was unexpected because it was unexpected. From the abstract: "These findings stand in stark contrast to the (incentivized) predictions of both experts and a nationally representative sample of laypeople, who - depending on the treatment group, outcome, and time period - estimated treatment effect sizes of +0.16 to +0.65 SDs."
em500 4y ago
Nobody thought a one off $500 or $2000 will be life changing and it's not what the researchers were surprised about. The surprise is that on most subjective well-being metrics, the groups receiving some windfall cash reported significantly worse after getting some extra cash than the control group (equally poor, receiving nothing.) [1] https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F3ced9e41-87d3-4f80-b096-b2b70aa98563_1192x1900.jpeg https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_...

londons_explore 4y ago

It's possible to convert a one-off payment into a lifetime regular payment. Simply invest the 5K and take out regular installments whose size is calculated based on your expected lifespan. Or buy an annuity. I frequently do that when presented with a lump sum of money - although few others seem to.

behrlich 4y ago
Using the 4% rule on $5k, your monthly payment would be $16 / month. The 4% rule is generally used for an on time retirement, so there’s no reason to believe you’d be able to maintain your $16 / month payment in perpetuity. I don’t think $16 a month is going to change their lives any more than buying necessities they need now with the $5k, but I guess we’d need another study for that :)
mattkrause 4y ago
If all you’ve got is $5000, that “endowment” still isn’t going to remake your life. Perpetual endowments usually spend about 5% of their market value per year, so you would receive about $20/month. Not nothing, but not life-changing either. Since you’re not going to live forever, you could draw a bit faster—-but transaction costs are also going to eat into that too.
whatever1 4y ago
Let do the math. 5k for 20 years with average 6% annual return on investments and 3% annual withdrawals (~$200 per year or less than $20 per month). With 0% inflation over 20 years, this will yield you $9000 (in 2042 dollars). The inflation this year is above 5%, and if this trend continues for long, your investment will pretty much evaporate slowly.

dash2 4y ago

They thought it was unexpected because it was unexpected. From the abstract: "These findings stand in stark contrast to the (incentivized) predictions of both experts and a nationally representative sample of laypeople, who - depending on the treatment group, outcome, and time period - estimated treatment effect sizes of +0.16 to +0.65 SDs."

em500 4y ago

Nobody thought a one off $500 or $2000 will be life changing and it's not what the researchers were surprised about. The surprise is that on most subjective well-being metrics, the groups receiving some windfall cash reported significantly worse after getting some extra cash than the control group (equally poor, receiving nothing.) [1] https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F3ced9e41-87d3-4f80-b096-b2b70aa98563_1192x1900.jpeg https://substackcdn.com/image/fetch/w_1456,c_limit,f_auto,q_...