Listed below are the 10 Money Game Financial Principles we cover in the basic stand-alone version of The Money Game. There are 26 Money Game Principles in total that we teach with our Camp Millionaire financial education curriculum. Feel free to check out all 26 financial principles on our Camp Millionaire site.
These principles have been derived from the classic, time-tested principles that have been documented time and again by most rich, wealthy, financially free people.
Note: We alternate between the words rich, wealth and financially free to help remove judgments that have already been ingrained in students by family, friends, teachers, media, etc.
1. Financial Freedom is Your Choice
Choice is a powerful tool and the first step in any achievement. We want kids to know that they must choose to grow up financially free before they will be motivated to take action to create this for themselves. In order to reach a goal, any goal, the goal must first be chosen
Participants learn that when people don’t get what they want it’s because they often don’t know what they want. They also learn that, when you don’t make a choice, you are actually choosing something else by “default”. Choosing financial freedom is the powerful first step that propels us on our way; it’s not a guarantee, but it launches the potential.
2. Creating Financial Freedom Is A Matter Of Developing The Right Habits
Habits are actions we do without having to think about what or why we’re doing them. Financial habits are established early on in life whether we want them or not. We acquire them through listening, watching, and experiencing how money works from our parents, other relatives, friends and the media.
Participants learn that they have two options: learn to be wealthy by doing what wealthy people do or learn to be poor by doing what poor people do. Many of our principles are habits in and of themselves; here are some others that are learned by playing The Money Game:
- Pay yourself first. (This is one of our principles and always worth repeating!)
- Develop a system for managing your money, i.e. The Money Jars.
- Invest “Freedom Jar” money in assets that will eventually produce multiple streams of passive income to live on (i.e., put your money to work for you).
- Never let your accounts get to $0.
- Get the right kinds of insurance.
- Pay off car loans and credit card bills before the interest accrues.
- Continue to learn. (Financially savvy people get that way because they are constantly learning and staying on top of what’s happening with their money.)
- Play! (Take time to experience and enjoy life with the money that you make.)
- Donate, on a regular basis, your time, energy and money to those who need it.
3. Pay Yourself First
By far, the most important habit of all financially free, wealthy, rich people is that they pay themselves first. Paying yourself first means putting your money into a place where it can work for you. It is not, however, always an easy habit to establish. Many people have the propensity to pay the bills first, buy the things that they want, or do things for others BEFORE putting their money away.
Participants learn what it means to “pay yourself first” and have the opportunity to practice it with every round of the game! They learn that Pay Yourself First means to save money when what it really means is putting money away for when you’re older, and hopefully wiser, and don’t want to or have to work anymore. They learn that Pay Yourself First means taking some of your money and investing it into different types of assets: real estate, businesses, and the stock market, so that your money makes money for you.
4. It’s Better To Tell Your Money Where To Go Than Ask Where It Went
Most people get a paycheck, put it in the bank (or have it direct-deposited) and just start paying bills and spending money. They think to themselves, “Well, I’ll save some money if there’s any left over.” We call this the Left-over Investment Strategy – which rarely works. This strategy often leaves people with a lot more “month” left over at the end of their money. People also don’t realize how easy it really is to keep track of their money, spending, etc. on computer-based software or online accounting software.
Participants learn the importance of knowing where their money is going and planning how much they’ll spend and save each month. In The Money Game, the basic living expenses are represented by big white bags and the amounts are the same every round. Though the numbers are conceptual (not real world), the lessons are very real.
5. Assets Feed You, Liabilities Eat You
One of the biggest lessons most adults learn the hard way is that they spend way too much of their precious financial resources on what we call “Piddyjunk” in The Money Game. In addition, one of the biggest distinctions we make in The Money Game, as compared to other financial education programs, is that we consider the home you live in a liability. It’s usually the Bank’s asset, not yours! (Yes, it’s an investment, but it isn’t an asset by our definition, which is: assets put money IN your pocket and liabilities take money OUT of your pocket on a regular basis.)
Participants learn that by wisely investing in the Three Pillars of Wealth (stock market, real estate and business), they will begin to receive this wonderful stuff called Passive Income. They learn at the beginning of the game that most people only know how to EARN money by trading their time and energy for money (i.e., a job). We expose them to MAKING money, which is when you put your money to work for you by investing in the Three Pillars.
6. Don’t Put All Your Financial Eggs Into One Basket
All too often, adults put all of their investment/retirement money in one place (and a variety of mutual funds don’t count). It’s critical that kids learn the different asset classes (Three Pillars) and the importance of investing in at least two and preferably all three. This is also referred to as diversification.
Participants learn the importance of investing in more than one type of assets. The Event Cards that begin during Round 5 often have something to do with the type of asset they invested in during previous rounds (if they chose to invest, that is). For example, all of their real estate is rented and they receive bonus passive income J OR a company in which they own stock goes bankrupt and they have to turn in their asset (poker) chip and don’t receive passive income any moreL. They quickly learn to diversify among the Three Pillars.
Note: Event Cards are “pulled” throughout the game to create variables in the process and provide opportunities for additional lessons.
7. Save Early, Save Often
It is often touted that compound interest is the most important concept kids can learn. These days, it’s rare that individuals get wealthy from compound interest. Unless you’re a financial institution, credit card company, private lender of some sort, or invest in second mortgages, your wealth is no longer coming from compound interest.
Albert Einstein is praised for this comment, “The most powerful force in the universe is compound interest” but it’s actually compound growth that kids need to understand.
Participants learn that it’s not compound interest but compound growth effect of investing that helps people get rich and become financially free. By looking at investments in terms of the three pillars, they see how each produces wealth:
- Stock Market – investors make money through the appreciation and depreciation of stocks (depending on the strategy used) and regular dividends that produce cash flow. Some of the growth may be interest if part of the money is invested in money market funds.
- Business – investors make money because the value of the business appreciates and eventually the owner sells the business. The profits produce the cash flow necessary to live on. (We include business models such as internet businesses and network marketing residual income.)
- Real Estate – investors make money on real estate from the appreciation of the real estate itself but, more importantly, financial freedom comes from having enough positive cash flow from rental property to more than cover the investor’s living expenses.
8. It’s Not How Much Money You Make That’s Important; It’s How Much You Keep
Adults have a tendency to think that having more money will solve all of their financial problems. In truth, it’s generally not more money that solves their problems but learning to better manage and invest the money they already have. Once that happens, yes, it’s great to learn how to increase the amount of money that is coming in.
Participants learn the importance of budgeting their money and the importance of not letting their accounts go to $0. They learn that having an SSP, aka Budget, is a critical piece to making their dreams come true. They learn that wasting their money on Piddlyjunk is how most people end up broke and/or in debt. They learn that making sure they plan and track their spending, saving and investing is one of the habits wealthy people do on a regular basis and why those wealthy people get and stay wealthy.
9. Money Is A Tool To Reach Your Dreams
More than any other substance on the planet, money makes people crazy. By and large, people have used money as a measure of self-worth, success, authority, and wellbeing ~ to mention just a few.
Participants learn that money is just a tool. Similar to needing a hammer and nails if you’re going to build a deck, money is an essential tool to build financial freedom and security. They learn that the amount of money they earn, make and have has very little to do with whether or not they are a good person. They learn that people are wealthy because of what they know and what they do with what they know. They learn that their self-worth has nothing to do with their net-worth.
10. Make Money Grow By Putting It To Work For You
Of all the investment principles, putting your money to work for you is both the most illusive and most challenging aspect of becoming financially free. It’s the investing piece that is so often left out because financial education instructors continue to be focused on what to do with the paycheck they assume all their students will eventually have. (One of the reasons this is prevalent is that the instructors themselves only know how to earn money by having a job.)
Participants learn that it’s the entrepreneur who becomes financially free the quickest. Those who started the business, invested in real estate or learned how to invest in stocks in a way that produced ongoing cash flow are the ones who have more money coming in than going out. In The Money Game, participants invest in the Three Pillars of Wealth and get to experience of receiving passive income from those investments on a monthly basis (well, unless one of our Event Cards changes things:).
Again, please feel free to enjoy all 26 Creative Wealth Principles.