Hey everyone, it’s Finance Fridays again. Today we’re going to talk about “Non-Monetary Return on Investments“.

Stock Photo from: Pexels

Non-Monetary Return on Investments?

Yea.

Basically, in general, when you talk about investments, you expect a return on your investment in terms of money (monetary). However, in this post I’m going to talk about investments we make with expected non-monetary returns in nature. The “dividends” or “interest” you receive from your investment will not be in monetary form.

It’s actually easier to explain with an example:

See that picture up there? It’s a picture of piano keys — that’s on purpose. A good example of a non-monetary investment is me paying for piano lessons for my daughter. To be fair, it’s kind of expensive for what it is, and not every family can afford to pay for piano lessons. I understand that. However, like most things, I utilize my Value Cost Ratio and I believe it is worthwhile for my daughter.

Like I’ve said before, not everyone can be a concert pianist or a famous musician.

I have no grand ideas of my daughter becoming a concert pianist or anything like that. The ability to play the piano at any level will likely not pay her any more money when she is older. Additionally, her future occupation will likely be completely unrelated.

However, I still consider it an investment. The reason for this is because it fosters growth. It’s not something that is tangible, but I am confident it will be real. I think having her learn to play the piano will instill a sense of work ethic, discipline, and pride. It is something that will be her own. My wife is pretty musically-inclined, she could play the flute and other woodwind instruments at a high level back in high school and college. However, she doesn’t play the piano.

As for me, I am about as musically-inclined as a tone deaf sloth.

For that reason, piano will be something that is hers — at least until Lucas is old enough and then I hope he will aspire to her level. However, piano lessons is just a gateway to other instruments and other experiences, should she choose to move on. Once she learns how to play the piano well enough, she can consider playing other instruments, such as a flute, like her mother, or perhaps something in the woodwind family like the clarinet or the oboe. Or maybe she decides that she wants to learn to play guitar instead. There are many options available.

It is my belief that as a parent, there is a small window for which you can expose your children to experiences so they can develop a curiosity for what interests them and their own unique personality — completely separate from emulating their parents. As such, while there is no monetary benefit in piano lessons — I believe there is still a real benefit.

Swimming lessons, baseball, football, basketball, etc, could potentially also be “non-monetary investments”.

What about education?

However, there is somewhat of a gray area when it comes to education. Some may argue that there is an expected monetary return on your investment of pursuing higher education. For example, in order to become a doctor you must finish 4 years of medical school, which is pretty costly. That said, there is an expectation that at the end of it all you will be able to secure a job that pays reasonable well in order to pay off your student loan debt. This is a monetary return on investment.

In contradistinction, let’s say you have a job and go back to get higher/more education because of wanting to specialize or do a new skill. This new degree/education allows you to do another job that doesn’t pay as well or even pays the same amount — however, your job satisfaction is much better. Then, to me, that is a non-monetary investment.

Other considerations

Choosing to live in a place that has access to good public schools, with potentially higher housing costs could be considered a non-monetary investment as well. You believe that even though you have to pay to live in an area that costs a little more, the benefit of good public schools will outweigh that extra cost.

Additionally, if you instead opt for your private school, maybe the experience derived from going to a private school will have intangible benefits in the future as well. In that sense, to you, opting for private school is a non-monetary investment — unless of course you believe that it helps your child to secure a better college education and better (higher paying) job later. In that sense, you are expecting a monetary return on your investment because of the hope of a higher paying job.

Long story short, whether something is a “non-monetary return on investment” or not has to do with what kind of return you expect on your investment. If the end game is still money, then it’s still monetary.

Any other personal examples?

Sure.

My daughter goes to Kumon , which is pretty expensive. However, I believe it will provide a solid foundation in math and reading. The likelihood is there is no potential monetary return on investment from this. However, my hope is that it will teach my daughter a strong work ethic while providing a solid foundation of math and reading. I’m not sure about the reading portion of Kumon, because I have no experience with it. I am hopeful that after it teaches her to read that it will move on to higher level stuff like grammar and reading comprehension.

While I like to write, I am fully aware that sometimes my sentence structure and grammar is weird. This is because I never actually “learned” grammar at least not the rules. I kind of just picked up what “sounded right” over the years. However, my little brother did learn correct grammar. I can tell, because when he writes, his sentence structure is much better and his writing flows much better than mine — and just sounds better.

TL;DR

Some investments have a non-monetary return on investment.

These are different for different people.

The point of this post is to explain that not all returns on investments are monetary — or even tangible.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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