H&R BLOCK: DOLLLARS AND SENSE

The Million-Dollar Question

If you woke-up tomorrow and saw you had a million dollars in your bank account, what would you do? When I speak to groups of teenagers about money, I often start with this question. Typically responses involve new cars, building a house, traveling to Europe and giving to charity. Most responses are focused on how that $1 million can be spent to enhance life.

After eliciting their responses, I then ask what they think a wealthy person might do with the money, which causes them to adjust their thinking. They sense I am looking for a different answer so they give responses about purchasing property, starting a business or investing.

Then I share my thoughts on what someone with a wealthy mindset might do-- invest the money in a combination of stocks and bonds and take distributions of approximately 6% every year for the rest of their lives. That is the equivalent to $60,000 every year that can be used to supplement income, enhance their lives, give to others, invest in other business, further their education, travel, etc. After a lifetime of enjoying the sense of financial security and opportunities this income would provide, they’re able to pass down $1 million to their heirs, thus creating a financial legacy of wealth in their family.

The million-dollar question helps teenagers think about money in a different way. It illustrates how our thinking about money is automatically confined to spending in the here-and-now rather than thoughts about providing a lifetime of financial security and freedom. Spending the money on big-ticket items would diminish the nest egg and its interest earning potential, thus requiring one to work harder or longer to replace the lost income. Long-term thinking is very unusual, especially for adolescents, but this simple question offers a fun starting point for discussions around money and an opportunity to challenge potentially destructive or counterproductive money beliefs.