What's the most dangerous word to your pocketbook? Believe it or not, it might very well be the word FREE. Sound crazy? Well, I will explain how when it comes to your money, FREE can be a four-letter word!
Economists aren't typically known for being all warm and fuzzy. But there is a branch of economists, called behavioral economists, who go beyond the numbers and really try to get into our heads to understand consumers. Professor Dan Ariely of MIT&Duke and author of a new book called PREDICTABLY IRRATIONAL postulates that FREE may be a word that we should tread lightly around.
- FREE BLINDS US: What happens when we hear the word "Free?" We go temporarily insane. We get so excited by our good fortune that we don't stop to think about how we may ultimately pay in the long run. Professor Ariely gives the example of how he had a choice between 2 cars and chose the less practical one simply because it came with "free" oil changes. He ended up with a car he didn't really love and only $150 in savings because he didn't drive it much.
- FREE BLINDS US FROM AN EARLY AGE: Professor Ariely did a Halloween experiment where he gave a bunch of trick-or-treaters Hershey's Kisses. He then told them they could have a small size Snickers for FREE or a big one in exchange for one small little Hershey's kiss. Clearly in the chocolate for chocolate exchange the latter was the better bet but the tots all went after the FREE smaller one.
- FREE OFTEN LEADS US TO BUY MUCH MORE: Free gift with purchase at the make up counter - how many times do you fall for that one? When you are at a store, be very careful. Companies know we respond to FREE and they don't put the word out there to be generous.
The bottom line is that when you hear the word "free," you should ALWAYS ask yourself what the person on the other end of the transaction is getting in return. It may be more than you bargained for.
For additional personal finance tips and insights, sign up for Manisha's Money Musings blog at: www.ManishaThakor.com/blog .
1005 S. Shepherd Dr.