Teaching children the different concepts of Personal Finance can be a difficult topic of discussion for some adults. Many adults feel clueless on where to start to make the subject interesting and captivating. Keeping a child’s attention on the subject can be daunting if the approach is too analytical. If you want to succeed with introducing children to the topic of personal finance, make the subject fun and exciting by using board games.
The game of Monopoly serves as a great resource for teaching children about the concepts of Banking, Real Estate, Law, Taxes, and Personal Income. In recent years, newly developed versions have been created to mirror the current world economy. The paper money has been replaced with debit and credit cards; everything is recorded electronically to capture transactions on rent payments, tax payments and passing go bonus. Instead of moving along US landmarks like Atlantic Ave, Park Ave and Boardwalk, the movement around the board is done within different continents. What ever version you choose, the principles are same and the rules of the game of monopoly have not changed.
If your serious about teaching personal finance to your child and if you’re going to use the game of Monopoly as a resource. Follow the real game instructions, not the instructions that were passed on to you as a child. Many adults don’t know the real rules, so its understood when some adults have trouble understanding how a board game that was issued to the public in 1930 can teach a person about finance in today’s economy. Here are 5 concepts that are thoroughly shown, when the game of Monopoly is played the right way:
- Banking – The Bank controls all the commerce and transactions in the game of Monopoly. The Bank holds the Title Deed cards to the houses and hotels, sells and auctions properties, pays salaries and bonuses, loans money when required on mortgages; also the bank never goes “BROKE”. Newly created money using blank paper can be used if all the money is distributed to the players. In today’s economy, the “Big Banks” that were too big to fail, received government bailouts and federal rescue plans that allowed the Big Banks to not go “BROKE”.
- Real Estate – Purchasing real estate either houses, hotels, railroads or utility companies. The goal and strategy with purchasing real estate is to not over or under leverage your real estate properties. If you have obtained a monopoly, then want to put at least 3 houses on the property. Buying railroads are also a strategic buy, because they are all around the board, if your opponent lands on them they have to pay you. The primary goal of monopoly is to bankrupt the other players, managing your debt load is key. In 2009, many individuals found out the hard way by not managing real estate debt. If buyers were over leveraged with owning real estate, they experience a financial hardship. But real estate is always a good investment, if you understand cash flow, leveraging and appreciation.
- Taxes - There are two options with paying taxes, a player can either pay $200 or 10% of the total worth of assets owned. If you cannot pay your taxes you have to start selling off real estate assets to pay your debt. Just like real life everyone pays taxes.
- Personal Income – Understanding how a player accumulates income either earned (active) or passive income.
Cash may be king but understanding how cash flow work is important, accumulating $200 for passing go is earned income. You have to make it around the board to receive your salary, but in order to receive passive income you want to purchase assets. Many adults still struggle with the concept of earned and passive income. When you’re passive income exceeds your earned income, your money is working for you not you working for your money.
- Law – In the real world, jail may be bad, but in the game of Monopoly a wealthy player can still receive income on assets purchased to bankrupt other players. This strategy is best maximize when the jailed opponent owns a large part of the game board real estate. Once another player lands on the owned property he or she has one of three options pay the rents, go bankrupt or go to jail. Leveraging you real estate assets can give a jailed opponent the luxury of still earning money from properties owned, while being in jail.
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