Money & Career

5 things you should do if you win the lottery

5 things you should do if you win the lottery

© Image by: © Author: Canadian Living

Money & Career

5 things you should do if you win the lottery

Every week millions of dollars are up for grabs in Canada's various lotteries. And while our jackpots won't get as high as America's Mega Millions lottery did at the end of March -- three tickets split $656 million -- our Lotto Max draws do regularly hit $50 million.

Everyone dreams of winning, but would you know what to do with that cash if your numbers were actually drawn? Yes, you'd go on that trip around the world, but many lottery winners then buy cars, homes and other pricey things on top of that initial splurge. It might be hard to fathom, but even $50 million can run out.

If you're lucky enough to win the lottery, here are five things you should actually do with that money.

1. Use a high-interest savings account

While you have a year to claim your winnings, it could still take a while to sort out what to do with that money. When you get your cheque, consider putting the cash into a high-interest savings account. While interest rates are low today, even a rate of one per cent on millions can generate more cash than most people make after years of working. (Though admittedly you do have to pay tax on the earnings.)

2. Invest in dividend-paying stocks

Imagine if that lottery win could last generations. It really can, if you invest wisely. Consider putting your money into dividend-paying businesses. These companies pay shareholders a set amount every quarter or year. Average Canadians usually buy these stocks so they can get a reliable income in retirement. A lottery winner could make even more millions this way.

But don't invest in a risky business -- many bank stocks pay a five per cent annual yield, which is more than enough to make your money last, and the risk of them going bankrupt is minuscule.

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3. Buy your dream house in cash

If you win the lottery, there's no way you won't upgrade your living conditions. Don't go crazy, of course -- think twice before buying a $20 million abode -- but if you want to spend a couple million on a new place, then go for it. But do pay in cash. Otherwise, you'll be locked into a mortgage and either you'll have to pay part of your winnings to the bank in interest or, if you end up wanting to break the mortgage, you'll owe a hefty penalty. Fork the entire amount over and never worry about a mortgage payment again.

4. Set up a donor-advised fund
Rather than simply cutting some cheques to your favourite charities, go to your bank and set up a donor-advised fund. You'll still be able to donate that money to whomever you want, but the financial institution will grow your dough in the markets so that you'll always have cash to give to people in need.

You could also set up a charitable foundation, but then you'll have to do all the accounting and administration work yourself. With a donor-advised fund, the financial institution takes care of all the tedious paperwork.

5. Spend, but not too much

Of course, you should take some of that cash and buy something nice for yourself, but don't overdo it. Make sure you talk to a financial professional -- one that deals with high net-worth clients -- who can help you spend that money wisely.

Follow this advice and it'll be difficult to blow through all those millions. If you don't plan properly and invest prudently, though, you may find yourself back at the lottery kiosk sooner than you think.

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Money & Career

5 things you should do if you win the lottery