What amount of money can be considered life-changing?
As we are using the type of prizes and the amount of money you are able to win as a part of the Real Score Framework when scoring competitions; whether the sum of money you can win could be life-changing is important to define. This blog post is just to expand on the thought process, and the reasoning on what can be considered a life-changing amount of money.
So… What is a life-changing amount?
What is is a life-changing sum of money for one, may obviously not be that for another person. If a millionaire wins £150,000 – their life probably won’t change much if at all. And even if one without millions on their bank account were to win the similar £150,000, if the money is not spent well… Well, it wasn’t really life-changing at all either! So, we’re going to have to do some generalisations and assumptions here…
We’ll work with the assumption that the majority of the population in the UK have similar basic needs and wants, and thanks to the Cost of Living Crisis (see the Guardian article about the credit card debts of Britons as an example), they might be struggling with what usually would be considered as basic needs. If such people, like you and me, suddenly got all their debts cleared and the amount of time spent each night worrying about the next lot of bills reduced from 4 hours a night to 0… And not only that, but to suddenly to be able to get on the property ladder… Surely, that is life-changing?
What do the statistics say?
According to the Money Charity‘s statistics (June 2024):
- The average household in the UK has a credit card debt of £2,495
- The average adult has £4,279 in unsecured debt
- On average it takes 10 years to save up for a house deposit
- While the total average household debt was £65,380, we won’t include this in the scenarios below – as this includes an existing mortgage already.
According to a study by Statista (2023): In 2023 £53,414 was the average house deposit, skewed by Greater London where the average was more than double (£127,320).
Finally, even if you won’t be able to get the full average deposit, you may be able to get a 5% deposit mortgage. And thanks to a recent government scheme, and some banks still doing these 95% mortgages – you will potentially be able to get on the property ladder with a lot less than you think! Though as rightly pointed out on Money Saving Expert, you should always push for a higher deposit to be able go get better rates and lower monthly outgoings.
With that out of the way… Let’s look into how much you’d need to ‘change your life’ in a couple of completely and overly-generalised made-up scenarios, that should still resonate with a lot of people and be realistic.
Scenario A – £100,000
A couple living in a rental flat with a somewhat average debt; £2500 on credit cards each, £4300 in personal loans, and no real chance of getting on the property ladder any time soon. Most of the disposable income is spent on nicer things like dinners out, and the occasional holiday. They’d like to see the world more, but all the income seems to be eaten away at by the rent, bills and the lifestyle.
Here’s how £100,000 could help:
- £60,000 towards travelling the world one year
- £8,600 to clear the personal loans
- £5,000 to clear the credit card debt
- £25,000 towards a house deposit & fees
- £1,400 into savings
Suddenly, going from being tied to the same rat race, the couple has been able to take a full year off and travel the world (assuming they’d have jobs to come back to) – and get a genuinely once-in-a-lifetime experience. But not only that, they are now debt free, and able to get on the property ladder and start creating their equity, rather than paying for someone else’s! That’s life-changing.
Scenario B – £50,000
Seriously in debt, person B has a decent salary, an existing mortgage, but is currently struggling with existing monthly payments due to having a £30,000 loan with a monthly payment of £600. The family car is also in serious need of repair or replacement, but there is no way person B could do anything about the car, that the family desperately needs and relies on. Person B also has £10,000 on a 0% balance transfer credit card, which always gets renewed every time when the interest-free period runs out (and pays the 3-4% fee). This means that person B is unable to reduce or get rid of this debt due to having to pay first £600 towards the existing loan, and then £250 each month towards the minimum payment, that isn’t really bringing the credit card debt down at all.
Here’s how £50,000 could help:
- £30,000 towards clearing the loan
- £500 loan early repayment fees
- £10,000 to clear the credit card debt
- £8,000 towards a 2018 Toyota Avensis (or similar new-ish and reliable family car)
- £1,500 to keep on your bank account
Imagine what you could do if you had £850 or more of disposable income, each month? How you would feel if for the first time, or in a long time you’d actually have money on your bank account and you wouldn’t have to stress about your debts? That’s life-changing.
Scenario C – £10,000
A young person, person C, lives somewhere less expensive such as in Yorkshire, who has been frugal enough to not get into any sort of major debt, but due to cost of living creeping up and the salaries not keeping up with inflation, is unable to save up for a deposit. The person has also managed to accumulate a small credit card debt of £500.
Here’s how £10,000 could help:
-  £7,000 towards a 5% deposit on a £140,000 terraced house in ready-to-move in condition
- £2,500 towards solicitor’s fees, due diligence and surveying of the property
- £500 towards the credit card debt
Suddenly, Person C is not just debt-free, but also on the property ladder, and not paying the landlord’s mortgage off anymore! On this occasion, winning £10,000 saved up to 10 years of his or hers life of frugal saving for a deposit! That’s life-changing.
Conclusion
Hopefully you agree with the above, that in the example situations the sum of money is genuinely life-changing – and that it doesn’t need to be in the hundreds of thousands or tens of millions! Therefore, when reviewing competitions: We will rate anything in excess of £10,000 as potentially life-changing, and anything above £50,000 life-changing.
This is exactly the reason why it’s so frustrating to see these multi-million mega jackpots (that hardly anyone ever wins), that would be enough to really change the lives of hundreds, if not thousands of people (this is also why we recommend certain competitions on this website that you should play instead of these massive lotteries).
As a final example, of the absurdity of how crazy a £150M jackpot is: You could give 3,000 people £50,000 instead, which is more than enough to be life-changing for most of us. This surely would be better for the economy, the country, and the general wellbeing of the public than making just one absurdly rich person – whilst making the rest a bit poorer week-by-week! The biggest jackpots so far (in September 2024) have been £195,707,000 in EuroMillions, and £66,070,646 for the classic Lotto.
Sources
The Money Statistics August 2024 – The Money Charity
https://themoneycharity.org.uk/money-statistics/
Average house deposit for first-time buyers in the United Kingdom (UK) from 2022 to 2023 – Statista
https://www.statista.com/statistics/557891/first-time-buyer-average-deposit-by-region-uk/
Mortgage guarantee scheme: 95% mortgages – Money Saving Expert
https://www.moneysavingexpert.com/mortgages/new-mortgage-scheme-for-5-deposit/
National Lottery (United Kingdom) – Wikipedia
https://en.wikipedia.org/wiki/National_Lottery_(United_Kingdom)
1 Year Around the World Trip Budget Summary – Claire and Peter
https://www.claireandpeter.com/world-trip/1year-around-the-world-trip-cost/
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