With the impending arrival of my mom (she arrived yesterday), I’ve been thinking a lot about how I’ve changed since I was a kid, and have come to realize that I might not have changed as much as I might have hoped. I was thinking about one of the first “real” economic systems in which I was an active party and I think my earning and spending habits have been relatively unchanged since I was 11.
What Are Room-Bucks?
I put the term “real economic system” in quotes because the money in question wasn’t currency in the traditional sense that I could exchange for US dollars. In the sixth grade, my language arts teacher, Mrs. M, made a special currency for use within her classroom – the room-bucks. It was a simulation that lasted through most of the school year, and this was basically how it went.
- Each week we could earn money through varying classroom activities. Although you could earn a certain amount of room-bucks through the basics like being a good citizen, not getting in trouble, and turning in assignments on time, there were also a certain number of room-bucks that you could earn if you did well on quizzes and tests. If I remember right, A’s were worth maybe $10 room-bucks, B’s were $5, and no money was awarded for anything lower than a B.
- Life event cards were randomly selected each week and think of them as slightly more realistic versions of the “Chance” cards in a Monopoly game. ”You forgot to file your tax return, pay a $70 penalty.” Or “You lucky duck! You found $10 on the sidewalk.” There were good and bad, but many had little effect on your pocketbook. Isn’t that the way life is? Most weeks there’s nothing particularly eventful happening to your wallet except your normal job! And our job was being students… That is, until our roles expanded a bit.
- After we started accumulating some serious room-bucks, Mrs. M opened up her own room-bucks store front that we would also get to visit once a week during room-bucks time. There were cheap toys that you could buy, but there were also a few really big ticket items that some people started saving up for. But given the current savings rate for most in the class they might never get enough money. So we petitioned for ways to earn more money.
A Room-Bucks Marketplace
We added to Mrs. M’s storefront – several class members started bringing in crafts or cookies to sell for room-bucks – there were restrictions on the stuff we could sell, namely that the actual monetary value in dollars had to be VERY low. Soon there was a pretty advanced economy operating every Friday for 20 minutes in the classroom. And I got rich, well rich in room-bucks.
Earning grades other than A’s wasn’t an option for me at home, so I was maxing out my earning potential in terms of both citizenship and academic performance. (What can I say, I was a good kid!) So I had tons of room-bucks in my little pencil case, but very little desire to buy most of the things that other people were selling. The only thing worth buying in the entire room was a cheap radio walkman – but it was costly in room-bucks. It didn’t even play tapes. Yes, cd’s existed – as did discmans, but considering that I didn’t have any cd’s, much less the means to buy any in the real world, so the radio walkman looked pretty good.
I remember realizing that was the only thing in the room worth having (IMHO) and figured out how much I would need to earn to get there. Even maxing out with good grades, I wasn’t going to have enough by the end of the simulations to get the walkman (and someone could possibly “buy” it first if they started earning faster than I did.
To step up my game, I would need a side hustle – so I needed to join the marketplace.
The problem was, I didn’t want to sell junky crafts and home-made mini cookies. If I didn’t value them to buy them myself, why would anyone else? And why would I waste my time making them if no-one would buy them?
My Answer – I Needed To Sell Insurance
Remember the life event cards that we had to draw every week? Well, some people were finding they took major hits. I had a lot of money, so I thought if I got a bunch of students to pay me a relatively reasonable amount every week, I could take on the risk of the life event cards and make a profit from it. And with the profit, I stood a much better chance of getting the walkman. They’d be getting a service they appreciated, and I’d get a walkman. Win – win, right?
This is how it ended up playing out:
- I advertised my insurance services at the start of the Marketplace minutes and had a few takers. I think premiums were something like $15/week.
- I had a few takers and we made a verbal agreement. To this day, I remember saying that the insurance coverage would start with the card draws the following week.
- Just a couple minutes after the agreement, a friend (and now customer!) drew his card and brought it over to me. He owed $300 in back taxes or something like that. I said, “But your insurance doesn’t start until next week!” He said, “But you took my money!”
- I paid. There was not a written contract to turn to, and it wasn’t worth losing a friend over, especially since I had the money.
I kept it up for a couple weeks until it became clear that my premiums weren’t high enough and I was losing money on the deal, so I closed up my insurance business. I saved and saved for the rest of the year and ended up giving most of my money away to others the last week of the simulation when I knew I wouldn’t have enough for the walkman. For the record, no one person had enough for the walkman at the end. =/
What Stayed With Me From Room-Bucks
The simulation in Mrs. M’s class was probably one of the best ways that I learned about how actual economies work before having to join one in the real world. So what stuck with me to this day?
- If I don’t want to buy something, I don’t want to sell it, either. I like adding value to situations, and I think that’s carried through in most of my jobs.
- I like figuring out how to quantify risk and value assets. Even though I hadn’t correctly been able to quantify the level of risk in the life events cards – and really, the deck could have literally been stacked and I would have never known – to this day I still like being able to figure out how much something is worth or what the possible downside of a given situation could be.
- I prefer having money in my wallet, err… pencil case, rather than getting more “stuff”. Most of the random “stuff” I ended up buying was mostly due to peer pressure – I’d buy an eraser to match all the other erasers the kids were buying – but it wasn’t something I felt really passionate about and I never seemed to get the same enjoyment out of shopping the way some of the other kids did.
- Sometimes it’s worth a little bit of money to keep harmony with friends. I know that we had agreed that the insurance coverage hadn’t started… but dude was my friend, and it wasn’t worth him feeling like he had been cheated over it.
- And lastly, it’s pretty amazing that 11 and 12-year-olds can come up with relatively advanced economic systems when provided with some basic constraints. Maybe financial education wouldn’t be so hard to learn if we all had a safe environment like Mrs. M’s classroom to test it out in.
What do you guys think of Mrs. M’s simulation? Did you ever participate in anything like it? Are there any other lessons you think I should have taken from the Room-Bucks simulation?