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Buying stuff gets a bad rap sometimes, especially in the personal finance space.

With extreme frugality examples like showering at work, mending your underwear, and living on ramen noodles being held up as some sort of perfect ideal to aspire to, it’s not cool to say you like stuff.

But I do.

I like stuff.

Now I should clarify, I don’t like all stuff. But some stuff, I REALLY like.

As a valuist, I have no problem spending money on things that are worth it to me, things that I deem to have value.

But determining what value is can be a tricky prospect. 

 

 

The Difference Between Value and Price

Value is not the same thing as price and people often mix the two up.

Price is the amount of money expected, required, or given in payment for something.

This amount of money is something that can easily be measured, like $5 or $50. It’s objective. $5 is $5 no matter how you FEEL about it. And an item priced at $5 is $5 whether you think it’s worth it, or not.

Value, on the other hand, is, ironically, more values-driven. It’s the regard that something is held to deserve; the importance, worth, or usefulness of something.

Notice how only one part of the definition deals with monetary value, it’s worth. All of the other terms are value-laden and subjective, terms like regard and importance. Who decides how important something is? It’s not like we have a value scale we can put different things on to see how they stack up.

To my son, his stuffed monkey is INCREDIBLY important. It’s valuable…to him. To another child, it’s just one of many stuffies they’ll see in his room which are equally forgettable.

 

 

All this leaves us with the problem of how to value our stuff. How do we know if we’re making a good decision when we buy things? What is REALLY worth it?

Yes the PRICE might be low, but is it a valuable item that we’re buying? A value scale would be nice!

Use the Fun Ratio as a Value Scale For the Kids…and Adults

Determining value can be hard enough for adults who are savvy-minded consumers, at least in their own minds.

But for kids, it can be really tough figuring out if what they want to buy with their allowances, commissions or birthday money is really worth it.

As kids become embroiled in the “I want this, and I want that” stage, and grandparents and aunts and uncles fill your house with more toys than a small army of knee-high munchkins could ever hope to play with, figuring out which possessions are valuable becomes very important.

Enter the Fun Ratio, a value scale meant to be both insightful and easy to use.

I first came across the Fun Ratio in the book The Opposite of Spoiled, by New York Times personal finance columnist Ron Lieber.

The Fun Ratio is a kid-friendly value scale, a way to calculate the return on investment for their toys and activities, or yours.

Simply put, it’s an estimate of the hours of fun per dollar that your kid’s wants would provide them.

Lieber describes one of his reader’s experience at Christmas where she was observing which toys her son was most enjoying. She noticed that two of his more expensive toys, a talking Tigger and a techno pup, held his attention for a few minutes but that he had quickly moved on to a couple of the cheaper gifts he had received, a cash register and a playhouse.

 

 

These less expensive toys ended up holding his attention for HOURS, much longer than any of the pricier ones he had gotten. The playhouse eventually broke apart after lots of energetic play, but the cash register lasted FOREVER.

The reader did a quick calculation based on the estimated time spent with toys and the cost and determined that the cash register was the clear winner, at about 180 hours of fun/dollar on the Fun Ratio value scale, while the talking Tigger lagged WAY behind at 0.08 hours of fun/dollar.

Years later, the reader’s kids determined that the best buy they’d ever made was a deck of cards, which lasted for years and only cost a couple of bucks.

My Kids’ Fun Ratios

My kids have a number of toys they can’t live without. But they also have a TON I don’t think they’ve ever even played with.

They have some that were VERY expensive, and others which cost almost nothing.

I decided to put their toys to the test using this new value scale to see what the Fun Ratios were. Just looking around our house from where I’m writing this, here’s what I see and what comes to mind:

Running the numbers is an eye-opening exercise.

It’s for the kids…and you!!

But it’s not just for the kids’ stuff.

How many of you, by a show of hands, have some piece of exercise equipment in your basement that you use more to hang laundry on than to break a sweat? (calling exercise “fun” may be a bit of a stretch, but we could tweak the calculation to say hours of “value”/dollars)

What about expensive trailers, boats, or other toys that only get used a handful of times a year?

Clothes you were dying to buy that have hardly seen the light of day since that fateful day?

I see those hands!!

The thought, though, isn’t to do the math every time you’re thinking about buying something.

Just having gone through the process of doing a few simple calculations like I did above is enough to activate your brain to think differently. What it does is bring an awareness to your internal value scale when you’re considering buying something that feels a bit like an impulse purchase. Does it pass the Fun Ratio test?

And, as an added bonus, it provides an awesome opportunity to sit down with your kids and have a chat about what true value looks like.

 

 

Kids are perceptive. They know which of their toys are more expensive than others. And they also have no problem letting you know which ones are their favs.

Once they’re old enough to do a bit of simple division, the Fun Ratio can be an AWESOME way to begin to talk about how to find real value from the things they want using some sort of value scale.

It’s important to let kids know that buying things, things that they want and don’t need, isn’t bad. In fact, it can be a GREAT thing!! We can get a lot of happiness and pleasure from the things we purchase. That’s definitely one of the perks of having money!!

The Fun Ratio Summed Up

But by thinking in terms of Fun Ratios, both personally and with your kiddos, you’ll start to view your spending differently. You’ll look at potential purchases with more of a discerning eye. And you’ll develop the innate ability to determine how to get the most bang for your buck!

 

How do you measure fun? What value scale do you use? Add to the conversation in the comments below or on Twitter @method_money or my Facebook page Method To Your Money.  You can also find me on Pinterest.  Want more great ideas for mastering your money? Sign up to receive my weekly emails detailing how to keep more of your hard earned cash!