Tuesday, March 10, 2015

Are Get-Rich-Quick-Schemes Pyramid Schemes?

Mar. 10, 2015

Dear Cathy:

The world is inundated with infomercials day and night offering to give free money, free goods or effortless income.  My daughter spend a lot of her time watching TV or on the internet looking for this free money.  Are these some type of pyramid schemes?  Free Money Seeker, Georgia

Dear Free Money Seeker:

Yes you said it.  These are pyramid schemes.  It’s unfortunate but there are many people out there like your daughter who spends most of their time chasing this supposedly free or effortless money.  She needs to wake up and smell the roses.  The trendiest “get-rich-quick schemes” offer newsletters describing a variety of easy-money opportunities; the perfect sales letter; and the secret to making $4,000 or more in one day.

Some email messages offer valuable goods, for example, computers, other electronic items, and long-distance phone cards for free.  You’re asked to pay a fee to join a club -- then told that to earn the offered goods, you have to bring in a certain number of participants.  You’re paying for the right to earn income by recruiting other participants, but your payoff is in goods, not money.  Many Multi-Level and Network Marketing schemes operate in this manner.

If these systems worked, everyone would be using them!  The thought of easy money may be appealing, but success generally requires hard work.  Most of these messages are covering up “pyramid schemes,” operations that usually end up collapsing.  Almost all of the payoff goes to the promoters and little or none to consumers who pay to participate so avoid these types of schemes.

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