For many of us, the classic game of Monopoly is a fun pastime for a rainy day. We huddle around the board, shuttling our metal tokens around and around. We roll the dice with excitement, anticipating the purchase of a hot property and dreading the possibility of winding up in jail. Although it may seem purely recreational, the game of Monopoly holds some valuable lessons about money.
Build your assets for the long-term
When I first started playing Monopoly, I used to avoid purchasing many properties. I thought they were very expensive, and I liked having a cash cushion. But as the game wore on, increased rents started to deplete my cash flow. Before I knew it, I was mortgaging the few properties I owned to pay the bills.
In real life, you need to constantly be investing to grow your wealth and protect yourself against inflation. If you just hoard your money, you risk losing it later.
Have a cash cushion
Although it is important to invest, it is also important to be prepared in case of an emergency. When I realized my “cash hoarding” strategy wasn’t working, I moved in the opposite direction. I recklessly bought every property in sight, regardless of expense. I reasoned that in the long run, these properties would pay for themselves. But when I landed on people’s houses and hotels, I didn’t have enough cash on hand. I was forced to mortgage my properties to pay the bills, and ended up losing most of my earning power.
Having a cash cushion can protect you from risks in the real world as well. You can cover short-term costs such as medical bills without selling your investments. Plus, it’ll help you sleep at night knowing you have an additional layer of financial security.
You never know what’s going to happen
In Monopoly, the roll of the dice determines your fate. A single roll could either bankrupt you or help you create a cash cow. Life is no different. There are many variables out of your control, but you must always make the best decision with the information you have.
Monopoly is a lot of fun, but there’s also a lot to learn. The next time you play, think about the decisions you make, and how they can apply to your life. You might be pleasantly surprised.
Vik Tantry runs kanjoh.com, a video blog focused on providing relevant financial information in bite-sized chunks. He writes about topics such as asset allocation and the financial crisis.