How do we measure the value of $1,000?
When most of us think of $1,000, we tend to measure it in terms of big ticket items, appliances, electronics, a new iPhone—in short, we measure the value of $1,000 by the purchasing power it confers. This way of thinking appears to be putting many Americans at financial risk.
A recent Bankrate report found that nearly 60% of Americans are unable to cover a $1,000 emergency expense. Of those surveyed, one in five, or 20%, of respondents said "they would put the expense on a credit card," resulting in even higher costs as consumers pay off interest
The report’s findings illustrate just how financially vulnerable many Americans are, and the responses of those surveyed are symptomatic of a purchase-centric way of thinking with regards to the value of money. Measuring the value of money solely by the yardstick of purchasing power creates an incomplete and problematic binary in the minds of many Americans. That is, by focusing on the purchasing power money provides, we preclude the financial protection and stability that money also confers.
And worse, by tethering the value of money exclusively to expenses, we actually reduce the full potential of $1,000 by limiting it to the purchase of goods subject to depreciation. Of course, the acquisition of goods is only one of the many ways $1,000 can be used, but it is unfortunately the most common measure of evaluating its potential.
Perhaps then we should consider instead: What is the value of $1,000 saved? How much power does $1,000 confer? How much interest does it earn, or how many emergency expenses can it cover? Only by asking these non-expense related questions can we arrive at a more complete assessment of the value money provides to individuals. Given the financial difficulties plaguing many Americans (as discussed previously), protection and stability, rather than purchasing power, is the better barometer of money’s value in Americans' lives.
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