Here's Your Money Education: "There's No Free Lunch!"

Here's Your Money Education: "There's No Free Lunch!"

money educationLet’s use the iPhone 4 to illustrate a critical money education concept.

?There’s no free lunch!?

This little phone/web surfer/back scrubber is the latest and greatest gadget to hit the market and, if you’re like a few million others in technologically savvy generation, you can’t wait to lay your grubby little hands on one. Even better, look at that incredible introductory pricing of $199! Holy mackerel. While electronic gadgetry is awesome indeed, be honest with yourself and recognize that it doesn’t really cost $199 ? that’s just the upfront fee to put the thing in your mitts.

Then the real money education begins. The phone itself is what companies like Apple call a loss leader, which means it costs more to make than they sell it for, but the plan is to earn back way more with back end ancillary products like software and services.

To begin, to get the $199 price on the iPhone requires a two-year contract, which includes a data traffic package for around $25 a month and voice/text package at about $45 monthly. Right there, you’re already up to $70 a month. And that doesn’t even take into account other software, ring tones, etc, you will likely decide multiple times along the way you can’t live without.

This is all well and good. Nothing wrong with blatant consumerism. It makes the world go ’round but don’t fool yourself into thinking that Apple will sell you a $199 iPhone out of the goodness of their hearts. Sorry to burst the bubble but they plan on squeezing you for years afterward until no more money comes out.

That’s a money education you can count on.

The Young Wealth Team

Flickr / Yutaka Tsutano