Last weekend Nike's newly released $180 Air Jordan 11 Retro Concords hit stores. People across the country lined up to fork over $180 per pair of shoes. People pushed, shoved, and trampled people to spend $180 that could have turned into $7,634.85, most of it free money.
Emma Dawney and Hetan Shah discuss this phenomenon, much better than I can, in a paper named “Seven principles for policy makers”. They came up with a list of seven principles of behavioral economics, but the first two are especially relevant to this event:
1. Other people’s behavior matters: people do many things by observing others and copying; people are encouraged to continue to do things when they feel other people approve of their behavior.
2. Habits are important: people do many things without consciously thinking about them. These habits are hard to change – even though people might want to change their behavior, it is not easy for them.
I often wonder if people are doing things they really want to do or if they are doing things that they believe others think are cool. It’s not cool to save and invest your money. It’s not cool to be financially stable. It is not cool to travel the world. It, apparently, is cool to spend money in a way that doesn’t allow you to build wealth (read my article Building Your Net Worth http://www.blackvoicenews.com/bvn-now/money-matters/46595-building-your-net-worth-.html) . I hear it’s also pretty cool to lick sneakers.
I’m guessing that the people standing in line ranged in age between 16 and 24. That means the average age of folks waiting in line at midnight to buy shoes was 20 years old. If you take $180 and invest for 47 years, assuming a conservative interest rate of 8% per year, that initial investment would yield $7,454.85 in interest alone. That means that if the people that fought and pushed to buy those sneakers would have invested that $180 and not added another penny they would have ended up with almost $8,000 in retirement. (Read my article Four Things You Might Not Know About Retirement Accounts http://www.blackvoicenews.com/bvn-now/money-matters/46466-four-things-you-might-not-know-about-retirement-accounts.html)
You can waste money right now or you can invest it and end up with thousands of free dollars later. I don’t know about you, but I think free money is pretty cool.
Shay Olivarria is the most dynamic financial education speaker working today. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. She's been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. To schedule Shay to speak at your event or to find out more about her work, visit her at www.BiggerThanYourBlock.com.
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