My children recently pulled out our Monopoly board. They're too young to play, but had fun fooling around with the toy money and the playing pieces. As I was tidying up, it occurred to me that for many people, Monopoly is something of an entrée into the world of commerce.
In the game, the only way you really make money is by buying properties, building houses and hotels, passing "Go", or by being lucky - inheriting money, coming second place in beauty contests, etc.
It's a pretty narrow view of the world. It misses many of the ways that people can make money. Apart from $200 each time you go around the board, where is the income that people generate from solid work, and adding value to clients and their organisations? Where are the businesses you can start?
At a deeper level, the game of Monopoly is zero-sum. Transactions make one party better off, but not the other. You can't add value and enter into transactions to make the pie (or, perhaps the board) bigger.
The game of Monopoly creates, and reinforces, the idea that paying "rent" is pouring money down the drain. It's not. If you're renting something - whether that be a house, or anything else - you are paying money in exchange for the use of something you value.
As an adult, I can see how narrow the world of Monopoly is. However, it amazes me how many people seem to see the world as though they are playing a game of monopoly.
Especially in New Zealand and Australia, it's as though people think the world of commerce and their opportunities for investing money are limited to buying property, renting it out, potentially improving it, and hoping for capital gains.
There are many ways of investing money, however.
- You can invest your money in all manner of financial assets. You can put money in a bank account or similar, and generate interest. You can invest in bonds. You can invest in shares - ie, take a partial ownership in publicly listed companies. You can invest in managed investment schemes, which involves pooling your money with many other people, so that your investment can be spread across dozens, hundreds, or even thousands of underlying investments.
- You can invest in privately held companies or projects. Many professionals, such as lawyers, accountants, doctors, and dentists, pay substantial amounts to buy an interest in their practice. This often generates a healthy return on their investment.
Alternatively, many people set up their own businesses. Being a business owner myself, I'm sympathetic to this. It is worth noting that many businesses don't have to be going concerns - it's possible to have a one-off, time-limited venture or project that can generate a one-off profit. (A movie studio, for example, might in the business of making and distributing movies, but each individual movie is a discrete project/investment.)
- You can invest in yourself. Paying for the right education can be the best investment you'll ever make.
Even thinking about property, there are many ways of doing this. You can buy a residential property to rent and hope for a capital gain. Or you can buy a property and add value by developing on it, or renovating the building(s) on it. You can buy a commercial rental. Or you can invest in a managed investment scheme where you are pooling your money with many other people to invest across a number of different properties which are professionally managed.
The key point I want to make is that life is not like a game of Monopoly. There are many ways to make money and to invest. Property is an option, and there are many ways of doing this. There are also many other ways of investing, including investing in financial assets, privately held companies or projects, and investing in yourself.