To the question ‘What else do you want to learn about money?’ in post-course assessment, it’s been 15 years that we always get the same answer: ‘to learn how to make my money grow’. First, this shows that participants know that budgeting and saving are definitely not enough to make a quick and big difference in their lives: there is only so much you can do with a low income, especially when you have debts to pay back, and live in a consumer society. This also echoes what we hear and read everywhere: Search for ‘grow money’ and you will find plenty of websites, podcasts and videos giving tips to ‘grow your money’. Even banks use this phrase in their marketing, usually with a photo of seeds and plants to illustrate the point.
There is only one problem: money does not ‘grow’. Money is a transaction tool: when you receive money, someone else has transferred it to you: your income is always someone else’s expense. When you invest and buy a share, you actually give money to someone who sells this share (most of the stock market is a second-hand market). When you sell this share later on, hoping for a gain, this is another transaction: you get money from a buyer. There is no ‘growing’ money out of nowhere, but only exchanges of money between people, with different motives and constraints, at different times. When you receive dividends (or interest if you buy a bond, or hold a savings account), the company transfers you this money, thanks to the money they, in turns, have received from their customers.
Why using accurate wording matters? Because fuzzy phrases like ‘growing money’ perpetuate the mystery about money and prevent critical thinking. So, when people hear about attractive returns, they fail to see it is a transaction, and do not question who the money comes from – which is the only question that matters. Why? Because investigating who is this ‘who’ – how likely this person or company will pay you, how trustworthy they are, how themselves get their money inflows, gives you a better idea of the risk, and how this transaction impacts others, and the Earth. Forget about seeds and plant; instead, picture money as a complex network, which each of us are part of. Money does not grow, but changes hands – even when banks create money, they do it by creating a future transaction: a debt to pay back.