FREE NEWSLETTER
DURING A RECENT vacation, my son Max and I played Monopoly. I was amazed at all the personal finance lessons you can learn from the game—one that was first produced in 1935.
We played by the actual Monopoly rules. That includes not getting money just by landing on Free Parking. It also means not auctioning off properties if the person landing on them decides not to pay the list price. These rules are important for two reasons.
First, it keeps the length of the game reasonable, important when playing with an eight- or 48-year-old boy. Second, it emphasizes the harsh realities of life in a capitalist society. Here are five key lessons you can learn from Monopoly:
1. Cash reserves are crucial. In the game, much like the current real-life environment, cash earns zero. But that doesn’t mean cash is trash. As in life, it’s important to have some cash around to pay your bills, take advantage of opportunities and get yourself out of the occasional jam. It’s also important, however, to realize that too much cash doesn’t do you much good. That cash is likely better deployed in high-rent-generating houses or, better still, hotels.
2. Debt isn’t always your friend. Whether it’s a business loan, student debt or a home mortgage, borrowing can be a wise short-term and even long-term decision. And let’s face it, sometimes it’s your only option. But borrowing can create a vicious cycle if things stop going your way.
Monopoly can teach this lesson quickly, especially if you can’t pay the required rent and find yourself mortgaging your properties. There’s a famous line in Ernest Hemingway’s The Sun Also Rises. “How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.” I’ve experienced this on more than one occasion playing Monopoly.
3. Illiquidity bites. Real assets like land, houses and hotels can generate significant income. But if you need to sell them quickly, you might not always get your money back. The rules of Monopoly dictate that houses and hotels are liquidated at a 50% discount to their original purchase price. Though this rule is extreme, it teaches an important lesson: If you need to sell an illiquid asset in a hurry, you might not like the price.
4. Remember the golden rule. You may be expecting me to say, “Treat others the way you want to be treated.” But I’m referring to the other golden rule: He who has the gold makes the rules. In Monopoly, the owner of the most land, houses and hotels generally wins. One major caveat—see rule No. 2—is that these assets must be unencumbered by a mortgage to be productive. Unlike in real life, the landlord receives zero rent when there’s a mortgage on a property in Monopoly.
5. Don’t discount luck. Just like in real life, luck plays a major “roll” in Monopoly. Yes, I believe that “the harder I work, the luckier I get” and that “you make your own luck.” But whether it’s a game like Monopoly where you literally roll the dice, or the real world of random occurrences, luck can indeed play a key part in our success.
The lessons are good, but you’re mistaken about some of the rules.
Properties are required to be auctioned to the highest bidder. That’s one of the things that speeds up the game. It also allows the player landing there the possibility of acquiring it for under list price. And while you’re right about zero rent when there’s a mortgage, that because you’re required to first sell off all house and hotels before mortgaging the property. You’re no longer a landlord at that point.
https://www.hasbro.com/common/instruct/00009.pdf
The most important lesson is learning how to negotiate trades with other players in order to obtain monopolies (all properties in the same color group). If no one is willing to do that, the majority of games will end in a stalemate as shown by a zillion (yep, that the exact number) of Monopoly simulations that I’ve seen.
It sounds like you were paying attention! Perhaps that’s the first rule?
#5…A few individuals/groups and columnists try to equate luck with some perceived privilege…hard work many times creates the luck needed to succeed…playing the victim card not so much.
Luck happens when preparation meets opportunity