A blogger who wanted to buy a car changed his mind after he calculated how many hours he would need to work to buy it.
It is easy for many of us to go on shopping sprees and buy much more than we would need or even be comfortable with the morning after. Often these purchases are based on impulsive decisions, which is why experts recommend that people think before buying.
One concept that seems to be very effective is the old adage ‘time is money’, which throws up the issue of differentiating between our needs and our wants.
That is exactly what the blog Squirrelers looked at when they tried to find out ‘how many hours did I work to buy an item?’. This method while simple can be very efficient.
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.
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.”
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?”
Whizz Education has developed a Maths-Whizz virtual tutor which is a great way to help children understand the value of transactions and progress at maths at their own pace.
“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).”