Have you ever tried to explain the concept of money to a four year old? I have and let me tell you it is not as easy as it sounds. My daughter, seems to think that it just appears, as if by magic, from that machine. You know the one, the one in the wall! 'It's ok dad. You can just go get more from the machine' is the answer that greets me whenever I have to tell her that no, we are not buying whatever toy it is she wants that day, or no we are not going there as I don't have any cash on me. Well, as you can guess this ends up in tears (usually for me as I am pulling my hair out, and while we are on it, how the hell do kids get so stubborn and go on for so long, I thought their attention span was measured in seconds, not hours!). Well, being the good financial advisor that I am, I thought it was time that little miss learned some of the truths about money, what it is and where it came from and then as if by magic she would understand and accept the fact that, no it doesn't just come out of a machine in the wall. Right? Umm.... no.
To say it didn't quite work that way was an understatement. As her eyes glazed over, my wife gave me one of those looks, the one that says 'why did you think this was the right time to teach her that?' The one that doesn't quite gloat, but you know secretly she is thinking 'you thought you were so smart didn't you'. Well I did, but delusions of a 4 year old money master aside it did teach me a few things about money.
You see money is abstract, the concept today quite divorced from the historical sense where it was an easier form of bartering than having to carry that sheep around and so on and so forth. Now it is number on a screen, a piece of plastic so separated from how we earn it, that is actually quite alien to most. I mean, we talk about budgeting and savings as if these are new concepts but really we have lost the importance of money amid the noise of new products and marketing. So how was I to explain to a 4 year old that I got paid money for my labour, and that money itself was just a store of value. Sitting here and typing this makes that abstract enough. So is there a better way to see money?
How about this. Money is a store of our time.
Pretty simple huh? We get paid money in exchange for the use of our time, to make things, to do things. We then use this representation of our time to purchase the use of someone else's. Now think about your mortgage for example. You are essentially borrowing from your future time to purchase that house today. You are saying to the bank, that you will work for the next 20-30 years and that they have a right to some of the fruits of that time. On the flip side, the bank or any lender, is essentially saying that you can have the time that we have saved up and you can use it now, but in return we want more of your time. Now does that change your perspective of paying off your debts? Just thinking about that changes how I see my mortgage. Do I want the bank to have my time?
If we make decisions from the paradigm of time, not money, would we place importance on different things? Is that fast food lunch truly worth going to work for those 20 minutes? Is that new, better, greater home truly worth your 20 years? Maybe, maybe not. Perhaps we will only find the right answers by asking ourselves the right questions.
I tell you this. I may not have a great explanation of money that a 4 year old understands, but if we can shift our thinking about money away from numbers and into time, perhaps our decisions will better reflect what we truly value.
The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances.