What we can learn from Harry Potter about money

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What we can learn from Harry Potter about money

Whether recently graduated or just starting out, today's college students are part of the Harry Potter generation. They grew up alongside Harry and his friends and know Hogwarts inside and out. What they don't know as well, if they are average Americans, are the foundations of a solid financial strategy, which is necessary to succeed as an adult.

Harry, Ron and Hermione were in a similar position, unfortunately—you never saw them in a "Budgeting Without Alchemy" class, and Gringotts was more ATM than bank. There's a reason why, at the end of the series, all the main characters are either bankrupt or living in poverty (according to my reading of the books).

Here are some of the financial lessons Harry and the rest could have benefitted from as they progressed through the series. They are lessons that we can all learn today, no matter what age we may be.

[Full disclosure: Our resident #millennial and confirmed Harry Potter expert was otherwise engaged and could not contribute to this article. The author, who is not a #millennial, only barely remembers the books and the movies, so some of the plot summaries below might be slightly off.]

Harry Potter and the Sorcerer's Stone

Harry Potter and the Sorcerer's Stone

In the first book, Harry has to take a magical hat off of one of the professors in order to kill Baby Voldemort, but to do that he needs a stone, and to get that stone he has to go through a series of American Ninja-like challenges.

This first year and first set of challenges would have been a great time to introduce young Harry to personal finance fundamentals like budgeting, saving, and debt management. The troll is a good representation of debt and how difficult it can be to defeat if you let it grow too large. The chessboard is a metaphor for taking the time and focus to set up a proper budget. And a flying key is a good example of how challenging it can be to find the best way to save your money, even though it's a critical skill if you want to achieve financial stability.

Harry Potter and the Chamber of Secrets

Harry Potter and the Chamber of Secrets

Harry fights a lizard to the death, vandalizes a troublesome book, and starts talking to spiders. He also crashes a car into a tree.

Although auto insurance is required in most states, it's easy to dismiss it as an unnecessary bit of overhead when you own your first car. Harry, Ron and Hermione learn the hard way that it's actually pretty easy to cause irreparable damage to an automobile, even if another driver isn't involved.

Harry Potter and the Prisoner of Azkaban

Harry Potter and the Prisoner of Azkaban

Harry thinks he is being chased by a werewolf, Hermione overschedules her calendar, and Ron has various issues with his pet rat. All three fight to save a beloved animal from being put down as punishment for injuring Draco the D-bag.

Obviously this a great teaching moment on the importance of pet insurance. By the time Ron discovers his rat sometimes turns into a person, it is too late to have this health issue covered by pet insurance, because it is considered a pre-existing condition. Had Ron purchased pet insurance in the first book, he would have saved money on vet bills for his rat.

A more indirect lesson in this book is the power of renters insurance. Although Hagrid is not technically renting his house at Hogwarts, if he had been, his renters insurance policy would have covered any injuries his pet Buckbeat inflicted on guests. This could have potentially saved Buckbeep from being targeted for a revenge killing.

Harry Potter and the Goblet of Fire

Harry Potter and the Goblet of Fire

Hogwarts battles two other universities in some kind of maze contest, although if I recall correctly there is also a hot tub scene with a ghost. Mad-Eye Moody makes an appearance and teaches the children in a rather graphic manner how sometimes a nickname can also be a trigger warning. At the end, Voldemort shows up in the maze and shoots a lightning bolt at Cedric the Entertainer, and everyone realizes Harry isn't an insane little lizard-whisperer after all. (Or at least, he's not just that.)

There's a lot to go over in this book, too much in fact, but some easy takeaways include:

1. What it costs to send a kid to college. Harry is going on a full scholarship, as is Hermione, but we can assume Ron's parents are paying through the nose for his education. They could have used a 529 college saving plan to put aside some WizardBucks tax-free for the past several years, which would have helped with Ron's tuition, and subsequently would have left the family with enough money to buy him a proper robe instead of an old curtain.

2. The importance of long-term disability. Of all the obvious metaphors in the Harry Potter series, Mad Eye's crazy eyeball replacement is one of the clearest. It represents the importance of disability insurance, in that it serves as a replacement for something Mr. Moody relied on before his disability (in the real world, this would be your income and not your eye). Even more literally, he likely wouldn't have been able to afford such a fancy prosthetic had he been struggling to pay all of his regular monthly bills, which is exactly the kind of situation long-term disability insurance prevents.

3. It illustrates a scenario where a child rider attached to one's life insurance policy would be useful. Just sayin'.

Harry Potter and the Order of the Phoenix

Harry Potter and the Order of the Phoenix

Harry's uncle dies and leaves him a house, and a horrible bureaucrat-slash-amateur-tattooist causes trouble all around.

What we see in this adventure is a scenario where, in the real world, a good life insurance policy would help. Harry inherits a house free and clear, but we can assume there's some wizardly tax dodging here (or the financial details are handled off stage by some bank goblins). In the real world, a house might also come with some taxes, or "inherit" could mean "paying the mortgage even though your household income has been slashed," both of which could have been resolved by a life insurance policy. Had Sirius owned one, and had this been the real world, Harry would have been in a much better position to continue his adventure.

Harry Potter and the Half-Blood Prince

Harry Potter and the Half-Blood Prince

Harry finds a recipe book and starts dating Ron's sister Wiggly, who, side note, can see skeletal dinosaurs just like Harry can. (Honestly I'm starting to forget a lot of the details at this point.)

This recipe book is actually less magical than some of the other books in the series, but all of these books have a modern-day analogue: apps for your smartphone. Need to find out what kind of bird you just saw? Audubon app. Want to learn new cocktail recipes? Bartender app. You'd like to communicate with others in a fleeting manner? Try Snapchat!

What Harry really could have benefitted from is a magical book that helped him better track where he was spending his money, especially since he was clearly the primary source of funds for many of the group's misadventures. In our world, this means he could have used a good money management app. He also could have avoided trips to that needlessly dangerous goblin bank if he'd just had a decent banking app.

Harry Potter and the Deathly Hallows

Harry Potter and the Deathly Hallows

Harry and friends leave college and go camping, which puts considerable strain on their relationships, as anyone who's gone camping with friends can certainly identify with. Lots of characters die. Mrs. Coulter and her golden monkey drag an angel into a chasm, while Neville Chamberlain shows us a magic trick he's probably been working on since his freshman year. Grown-up Voldemort is killed. (Hey #millennials, did you know you pronounce Ralph Feinnes' first name "Rayf" and not "Ralph"?)

Once you get past all the travel writing and flashbacks, you reach the final financial literacy lessons of the series, starting with another opportunity to discuss the growing cost of education.

Harry & Wiggly, Hermione & Ron, and probably some other characters come together at the very end to send their own children off to Hogwarts. We can assume the school's tuition and fees have risen dramatically in the past few years, so hopefully they're all paying these bills with cash from a 529 plan. (See The Goblet of Fire.)

In addition, all the main characters notice how old the other characters look, and they probably talk about this when they're back in their magic cars. The truth is they don't look older because they have naturally aged, but because they are all stressed out by the mountains of Weasley student loan debt the two couples are still buried under. This debt has taken longer to pay off than they first estimated due to other debts they've taken on, like mortgages and credit cards. It's a good cautionary tale about racking up too much debt, and a chance for the reader to consider the various student loan repayment and consolidation options available to graduates.

But most of all—and this is the underlying theme of all the books—we see how important it is to buy a sensible life insurance policy. Because if there's one thing the world of Harry Potter hammers home relentlessly, it's that people die, often quite unexpectedly, and therefore it's smart to plan for the worst and make sure you're covered by life insurance. That way no matter what happens to you, your kid can still attend the most dangerous school in the country.

Photo: David Muir