Our family just bought a new refridgerator. Nothing fancy. Just a box to keep things cold. We hope that it lasts as long as the one that it replaced. The day after it was delivered I glanced at the package of papers that came with it. One featured big print suggesting that we should "Protect Your Investment With an Extended Warrantee".
Don't know whether it was that I was a financial planner before starting The Dollar Stretcher.com or that I use written words to communicate everyday, but the use of the word 'investment' really bugged me.
Back in my financial planner days I was trained to know that an 'investment' is something that returns more than you put into it. For instance, when you invest in a stock you expect that it will go up in value and you'll be able to sell it for more than you paid for it. Or a bond or CD. You invest a certain number of dollars with the expectation that you'll get your money back and earn interest either paid during the investment or at the end. But, you'll end up with more money than when you started.
Just to make sure that my memory wasn't going bad, I checked a professional source. nvestopedia defines investment as: "An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price."
Back in the 80's we first started seeing 'investment' used a little more creatively. Parents were told to invest in their children's education by sending them to college. The argument was that whatever was spent sending them to college would be more than repaid in higher earnings during their lifetime. And, for awhile, that was true. But recent years has brought ever increasing costs for college and some degrees with questionable marketability. Add to that the student loans that now total more than all the credit card debt (approximately $850 billion!). The result is that college might not be the 'investment' that was claimed. In fact, I did a post about that awhile back. In fact, some are calling recent college graduates "the lost generation" in part because of the debt and economy they're facing. For many young people college crossed the link from 'investment' to something that's consumed today.
As time went on our friends in Washington and the statehouses took it even further. They've attempted to redefine much of government's spending as an 'investment'. In fact (yes, I know that I'm a tightwad) it almost appears to me that they've confused the terms "spending" and "investment".
Now marketers for things like appliances are getting into the act! Let's think clearly about this. A refridgerator is NOT an investment! It's an expense. A necessary expense no doubt, but still an expense. That box will never be worth more than what I paid for it. And, unless I open a restraurant (highly unlikely), it will never earn me any money.
What's the point? Consumers need to see through the words used to sell them. We all like investments. Investments are a good thing. They're what we put in retirement accounts so that we'll have money after we retire. Investments represent money we've saved for a rainy day. So when we hear the word investment we tend to think favorably about it.
But, we shouldn't let politicians or marketers or anyone else fool us. If something does not increase in value or pay income to us it is not an investment. No matter what they tell us. It may be a worthwhile expense (our fridge was). But if I believe that it's an investment I'd be a bigger fool than the guy who wrote the headline on the extended warrantee sales flyer. And, that's not a title I plan on accepting this month!