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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