Money Lessons from Monopoly

I've told how I think the Game of Life teaches personal finance as well as told you about a game that's trying to replace the "king" of money-related games, so now I think it's time I offer my thoughts on the "king" himself -- Monopoly. But first, I thought it would be fun to share some facts about the game from Wikipedia:

According to Hasbro, since Charles Darrow patented the game in 1935, approximately 750 million people have played the game, making it "the most played (commercial) board game in the world."

The history of Monopoly can be traced back to 1904, when a Quaker woman named Elizabeth (Lizzie) J. Magie Phillips created a game through which she hoped to be able to explain the single tax theory of Henry George (it was supposed to illustrate the negative aspects of concentrating land in private monopolies). Her game, The Landlord's Game, was commercially published a few years later. Other interested game players redeveloped the game and some made their own sets. Lizzie herself patented a revised edition of the game in 1904, and similar games were published commercially. By the early 1930s, a board game named Monopoly was created much like the version of Monopoly sold by Parker Brothers and its parent companies throughout the rest of the 20th century and into the 21st. The Parker Brothers' version was created by Charles Darrow. Several people, mostly in the U.S. Midwest and near the U.S. East Coast, contributed to the game's design and evolution.

I used to play Monopoly quite often. My dad and I would play late into the early morning on my trips home from college. We'd play several games in an evening -- starting at 10 pm or so when my mom went to bed until 2 am, 3 am or even later (FYI, you can play several games in that time with two players as many games end early when one player establishes an unbeatable position.) But in the years since then, I haven't played much at all, if any. I got busy with work, a family (young kids aren't into Monopoly), and, of course, video games as an alternative form of gaming. But when my daughter got a Monopoly game at a garage sale and wanted to play, I couldn't refuse.

The game was a lot different than I remember it, and it's a lot different with four players than with two (mainly, it's much slower.) But the family had a fun evening playing it (or at least I did, since I won!) In addition, playing the game reminded me how much Monopoly teaches about handling and managing money. Namely, here's what I think it's good at teaching:

• There's a balance between risk and reward. Just like in real life, you need to balance risk and reward in Monopoly. If you're too cautious, you'll get left behind (dying a slow, painful death) and if you're too risky you'll lose it all. In our game, I was the first to "risk" it by building houses when I was cash-poor (though it was a calculated risk -- see point #2). I was rewarded for doing so, just like I would have been in real life with a comparable move.

• Strike while the iron is hot. We've talked a couple times about how you can make a big leap in income if you seize a huge opportunity presented to you. It's the same way in Monopoly. I decided to build my houses just as others were coming around the board and lining up to hit my squares. Sure, they all could have missed them and I would have been in trouble if I'd needed any decent amount of cash, but how likely was that? If you can strike when opportunity presents itself, you'll do well in both money matters and in Monopoly.

• Luck is a big part of the process. This is the thing that made me abandon Monopoly and take up chess. I HATE the luck element. It can take otherwise good decisions and make them horrendous. In personal finances, you can only do what you can do to be successful, and most will do well doing so, but luck (accident, bad boss, good break at work, etc.) can still alter your financial life in a big way. That said, the game certainly does teach you to be nimble and adjust to whatever "luck" throws your way.

• Cash flow is vital. Just like in real life, if you run out of cash in Monopoly, you're in a world of hurt. That's why you need to do all you can (make sure the gap between your income and spending is as large as possible, you establish an emergency fund, etc.) to make sure you never run out of cash.

• You can gain an advantage if you can negotiate. In Monopoly, if you negotiate, you can make significant gains (though my wife did have to reel me in since I was negotiating with the kids a bit too hard). In real life, simply asking for a discount can save you big money. In addition, there are many other ways the skill of negotiating will benefit your finances, such as in asking for a pay increase when one is deserved or when interviewing for a new job.

Those are my highlights, but I'm sure I missed some. What are the money lessons you think I missed from playing Monopoly?

Comments

[Eric]

I love the negotiations in monopoly. I was cash rich in the last game I played but had no properties. There was only 2 properties left on the board with the same color, I had the third. My wife somehow picked both properties up and I had to cut a deal with her. I bought the properties from her for 20% less than she paid, with a promise that if she landed on them she could go rent free, and get 10% of all rent paid to me by the other players for those two properties.

while everyone was busy buying up all their properties and had no cash I was busy hoarding it. Once my wife made the deal on the properties I purchased 4 houses on each. By the end of the game I owned almost the entire board, forced all of the players into bankrupcy and purchased all of their properties for 50 cents on the dollar because they were in a bad position... I love that game!

[FMF]

Eric --

Oooooooo, I like that deal you struck with your wife. I'll use it in the next game if need be.

At first, I thought you were going to say you negotiated some off-the-board deals with her. :-)

[Miranda]

Monopoly is one of those games that is fun to play for about an hour. Then it gets boring -- at least I think so. Mainly because by that time everyone has what they have, and it's just about landing somewhere and paying what you owe. Maybe I need to play with people who are more willing to negotiate...

[Eric]

Wow the whole negotiating thing just takes the game to another level doesn't it? I guess I know why my Monopoly games have been boring...

[Rob Bennett]

Here's another tip: It Pays to Think Ahead.

Say that you land on one of the three light blue properties and another player lands on the second and that the third has not yet been purchased. You can try to swing a deal for the second light blue property. The other player will demand much less in a trade than he would if giving it to you were giving you a monopoly. But you greatly increase you odds of getting a monopoly by swinging this trade. Also, if you get the third light blue, you will not need to worry about buying other properties because you will already have a monopoly and building that one up quickly could bring the hammer down on your competitors. So you could end up saving a lot of money.

Re the Luck matter. It certainly is so that it is annoying that luck largely determines who wins a single game. But that's not so in the long run. The player with the better strategy will win more often. I think it works out that way in real life too. Smart strategies can play out awful on one or two or three tries. But they prevail in the end. The trick is to live long enough to see your good ideas come to fruition.

Rob

[Erik Folgate]

Good stuff, I am with you though. I don't like the huge luck element involved with Monopoly, but it's still one of my favorites, because it teaches kids how to negotiate, manage cash, and make entrepreneurial decisions.

[LotharBot]

1) I love Monopoly in large part because I share my name with its (credited) creator.

2) Some specific lessons Monopoly teaches:

- sometimes you're at an advantage or disadvantage for personal reasons. As a kid, my brothers or friends would sometimes give certain people better deals than others for personal reasons; as an adult I tend to see it with couples. One big advantage is having people underestimate you -- I've won a lot of games simply because someone was more worried about another player, and therefore gave me a sweet deal to improve their position relative to the other guy.

- having multiple bidders drives up the price. I love telling competing players "if you don't want him to get this, make me a better offer", sometimes it results in me filling out a better monopoly or getting extra cash.

- little things can add up. The steady income stream from having 3 railroads, for example, can give you a solid edge in building and being able to pay off debts.

- the difference between a "good deal" and a "bad deal" is sometimes very subtle. If you can get the greens and have enough cash or cash flow to get them to 3 houses each, they're one of the best sets in the game, but if you don't quite have that much cash they're fairly weak.

- people who mostly consume (that is, land other people's property) get poor, while people who spend their money creating money-making investments (property owners building hotels) get rich. If you have $2000 in cash and little property, you're way behind someone with $200 in cash and some moderately developed monopolies.

[Mike Hunt]

It's a classic. It taught me a bit about probability & statistics... the oranges are some of the best properties to land! Go NY Ave!

When I played with family there was not too many trades.

One memory is finally getting all the reds and yellows full of hotels and my sister was hanging out on community chest before jail and wouldn't roll the dice for about 30 minutes. Finally we all got frusterated and someone else ended up kicking the game (we were under 12). So I never got the nice payout after building all the hotels. Still remember this even now!

-Mike