Ah, Monopoly — the game that’s been causing family fights since 1935.
Besides revealing how competitive your family members are, Monopoly has some solid lessons about personal finance.
Buying an expensive property can bankrupt you if you can’t afford it, for instance. And it’s always good to have a few hundred dollars lying around in case you wind up in jail.
So what else can this Parker Brothers creation teach us about money management? Here are five valuable lessons you can take off the board and into real life.
1. Don’t sit on too much cash
When you play Monopoly, everyone starts with $1,500. Plus, you get $200 every time you pass “Go.”
As long as you don’t run into any problems (ahem, jail), you could keep quietly collecting money and never spend it.
But saving all your cash isn’t the road to victory. Instead, you need to make smart purchases and build long-term wealth.
“Sitting on too much cash is not a good thing!” said Levi Sanchez, certified financial planner and co-founder of Millennial Wealth. “It’s important to invest cash into assets that produce a cash flow or appreciate in value.”
In real life, holding on to too much cash could mean you miss out on the returns you’d get from investing. Even high-yield savings accounts only give you about a 1.00% return. This small return might not keep up with inflation, which causes your cash to lose value over time.
Instead, it’s a better idea to invest your money in a brokerage account, individual retirement account, or employer-sponsored 401(k).
Investing in property might also be an option, depending on your finances. Just be careful not to buy a Park Place property if your budget is better suited to Baltic Avenue.
2. Avoid spending all your money right away
On the flip side, you don’t want to spend too much right away. You need cash on hand to keep buying properties. Plus, you might have to give cash to an opponent or pay a fee after picking up an unlucky “Chance” card.
According to Todd Huettner of Huettner Capital, this part of the game teaches you how important it is to save and budget your money.
“You have to save up some money to be able to survive some rough times,” said Huettner.
In personal finance-speak, this is called an emergency fund. It’s used to cover unpredictable expenses, such as a car repair or medical bill.
For maximum security, try to build an emergency fund that could cover three to six months’ worth of living expenses.
That way, you’ll be financially set if you lose your income or want to make a career switch.
3. Diversify your portfolio
Buying up properties in Monopoly will earn you money if someone lands on your square. But with 40 spaces on the board, chances are slim that a player will end up on yours if you only have one.
That’s why it’s a good idea to buy up multiple spaces around the board and increase your chances of making money.
The same goes when choosing stocks and bonds for your portfolio. Instead of putting all your eggs in one basket, make sure to diversify your holdings.
If you’re not experienced at picking stocks, consider index funds. These contain a variety of stocks and bonds and are designed to mimic the ups and downs of the overall market.
So even if one investment decreases in value, your investment should be safe.
4. Negotiating is always worth a try
At some point in the game, you’ll probably start negotiating with your opponents to trade properties or borrow money.
According to Sophie Miles, co-founder of QuotesAdvisor.com, this strategy helped her prepare for real-life negotiations.
“This game has helped me a lot to negotiate with suppliers, obtaining prices, and knowing when to negotiate and when not,” Miles said.
Even if you don’t run a company, negotiating is a useful skill for your career. Some new employers expect salary negotiation after making you an offer, for instance.
And if you’ve already been with your company for a while, asking for a raise could help you earn more money. But you have to be strategic in how you ask, so make sure to practice negotiation strategies before you make your request.
5. Be patient and play the long game
Monopoly continues until all players but one have gone bankrupt, so it can go on for hours. Just like playing the game, meeting your financial goals is a marathon, not a race.
Whether you’re saving for retirement or a vacation, you’ll need to be patient. Paying off student loans or setting up a new income stream will also take time and involve a lot of ups and downs.
While it’s easy to get excited at the beginning of a goal, it’s harder to stay the course. But by putting in the work — and remembering there’s a light at the end of the tunnel — you’ll achieve your goals.
Even if that goal is finishing a game of Monopoly before a family member flips the board and storms away.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
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