When was the last time you heard about someone putting something on layaway? It used to be that stores advertised the option to put a down payment, pay overtime, and collect an item kept in storage while you saved the money to pay for it in full.
Perhaps stores still offer this service, but you don’t hear much about it. What is there now? Afterpay. The service offer short-term financing, which is paid back within six weeks with interest-free payments. If you fail to repay the money within the six weeks, penalties apply.
Afterpay is not the only such offering, but it is gaining marketshare. Many major retailers accept it, and you are offered Afterpay even when getting quotes for home maintenance and repairs. At first blush, Afterpay may seem innocuous. Isn’t it just like layaway but expanding the time you have to pay for something in totality.
What is the difference between layaway and Afterpay? Incentives. With layaway, the desired toy, electronic, winter coat, or shoes are not in your possession. You have a powerful reason to continue paying and experience a clear and direct benefit to fulfilling a financial obligation.
With Afterpay, your ill-advised Lululemon stretch pants, Apple watch, and overpriced mattress are yours on day one. The payments are not an exciting step toward achieving ownership, as in the case of layaway but a bit like a nagging hangover. You likely forget you signed up for the payments, the shine is gone quickly from the new object, yet the bills due carry on.
This brief thought experiment on the differences between saving up and paying back is not meant to be financial, though in this workaday world our incentives will often involve money of some kind. Thinking about why layaway motivates you to pay while a program like Afterpay can encourage you to buy things you don’t need and will regret paying off over the next six weeks can yield insights that apply to all kinds of other incentives. We don’t need to bribe our children, and, in fact, bribery can seriously disturb our inner calibration toward the satisfaction of a job well done, but we can place causes and effects in logical order.
We should not attempt to limit this to our children. They are learning from what we actually do, not from the lessons we attempt to bestow on them from our great wisdom. If you are not really doing it, they are probably not learning it. How can we set up our own lives continually to offer ourselves compelling reasons for positive action?
In his popular book “Atomic Habits,” James Clear writes, “Sometimes success is less about making good habits easy and more about making bad habits hard.” Putting the incentive in its logical place makes sense.
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