We’re all guilty of a spending spree, but experts are encouraging more people to think before we buy.
The concept stems from the age-old ‘time is money’. And exploring that idea throws up the issue of differentiating between our needs and our wants.
A blog by Squirrelers, looks at the idea of ‘how many hours did I work to buy an item?’ It’s something we’ve likely all looked at, but the method is more powerful than you may think.
In this blog, the example talks about a car costing around $25,000, and the person who purchased it had a salary of $25,000 per year.
The blogger worked out this calculation below:
$25,000 salary, divided by 250 working days, = $100 per day.
$100 per day, divided by 8 hours, = $12.50 per hour.
$12.50 per hour, multiplied by 75% – to account for tax – = $9.38 per hour post-tax $25,000 car, divided by $9.38 hourly rate, = 2,665 hours.
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This meant that they would need to work 2,665 hours to get the car, and when taking into account that the calculation above assumes 2,000 working hours per year, this comes out to 1.33 years of their life that they have worked just to pay off a car.
Pretty crazy when you think about it, right? The blogger also explained that even from a young age, he would work out the cost of cinema tickets.
He said: “When I realized that for me to spend $9 to see a 2.5 hour movie and enjoy popcorn and a soda, it would take me that long at work just to do that.
“It got me thinking about how maybe I didn’t need to get the popcorn and soda, and maybe should just get one or the other.”
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So, is this something that young children and teenagers should start to think about when they grow up, to help them manage their money effectively?
Director of education at Whizz Education, Dr. Junaid Mubeen, said: “Time is certainly related to money. There is something to be said for thinking of both time and money as forms of exchangeable currency.
“We invest time to generate money, and we often spend money to have a good time.
“Therefore, it’s important to imbue students with a sense of fiscal responsibility from a young age, and what better way than to demonstrate how money interacts with time?”
This responsibility will allow young people to make informed judgements on whether a particular experience (like that cinema ticket) is really worthwhile.
Junaid continued: “It also gets students thinking about the ‘opportunity cost’ of any purchase. A £9 cinema outing sounds good, but they might consider what else they could do with £9?”
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“One of the main features is a virtual ‘shop’ where students can spend the credits they have earned by progressing through lessons.
“Students can buy things like virtual pets and furniture, and they can even buy clothes to customise their avatar.”
“It’s our light-touch way of teaching students the basic principles of financial management, which we think will serve them later in life.”
Although there may not be a lot of emphasis on this aspect of money at school, Junaid believes that “when it’s taught well it can make a dramatic difference to one’s fortunes (literally).”