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Game On: The Power of Gamification in improving Financial Literacy

, May 20, 2024, 0 Comments

Recently, my faculty colleague shared about her enjoyable class experience in which she used the game Monopoly to explain key financial concepts to undergraduate commerce students. She discussed how the use of flash cards and online games have helped her teach her young students important financial habits of savings, borrowings, investments and retirement planning.

Understanding the intricacies of managing personal finance is a great challenge for many individuals. Such limited financial knowledge results in poor wealth management decisions, adversely affecting their financial health. According to Financial Industry Regulatory Authority (FINRA) Investor Education Foundation’s National Financial Capability Study (2018), the financial literacy rate in USA is 34%. As per the National Institute of Securities Markets Study (2019), only 24% of Indian adults are financially literate. According to the University of Southern California Study (2017), China’s financial literacy rate is close to 29%. Regulators across the world are working towards improving financial literacy rates as studies like the S&P Global Financial Literacy Survey have shown a positive association between high financial literacy rate and high economic development.

gamification-financial-literacy-marketexpress-inGamification can prove to be an effective strategy to improve financial literacy. Gamification implies the inclusion of game elements like points, rewards, leaderboards in non-game contexts. Many individuals find financial concepts complex.

However, gamification demystifies the financial concepts by breaking them into small, digestible modules. It makes the learning process both effective and enjoyable. Gamification simulates real-life situations which makes it engaging thereby making players more likely to retain the learnings.

In our childhood, we played board games like Monopoly and Game of Life. These popular games have instilled the values of (a) managing limited funds (b) negotiation for a good deal (c) balancing savings, investment and income and (d) identifying one’s own risk appetite in us.

Nowadays online financial games like The PayOff, Financial Football, The Great Piggy Bank Adventure are available. These online games help players to develop critical thinking ability in personal finance management. They allow players to make an informed decision based on their goals, preferences and constraints. Games typically enable the players to experiment with different scenarios based on the choices made. The players learn from their mistakes and are able to understand their own risk profile. These online financial games have a positive influence on financial behavior. Players get a sense of achievement and recognition when they earn rewards or points on making good financial decisions. It is likely that they will continue these behaviors in real life. Further, most of the online financial games adapt to the progress made by the user. This kind of customized feedback helps players have an effective learning process.

Several financial institutions have recognized the potential of online games to enhance financial literacy, engage consumers and promote their financial services in interactive way. For instance, in 2005, Wells Fargo launched an online role-playing game called Stagecoach Island, which aimed to educate youth regarding money management skills. In 2022, American Express launched a virtual game called ‘American Express Summer Drop’, which enabled players to win tickets to various prestigious events and programs. Visa, a key player in the digital payment platform, has launched various online games to promote financial literacy. For example, Money Metropolis is a virtual game that trains the players on income, savings, and expenses. Peter Pig’s Money Counter is for kindergarten kids who learn the counting and sorting of coins.

Regulators have also recognized the importance of games to improve financial literacy. The Washington State Department of Financial Institutions has, in fact, recommended a few free online games and apps that can be used by children and young adults to better understand money matters. For example, Wise Pockets is an interactive online game that teaches children on how to manage money. Chair The Fed Game is an online game for teenagers to understand how monetary policy works by taking charge of a simulated economy. The Stock Market Game is for young adults to develop fundamental stock trading and investment knowledge. In New Zealand, there is an online platform called Sorted, a free service offered by the independent agency called TeAra Ahunga Ora Retirement Commission. The main objective of Sorted is to empower New Zealanders to be financially independent. They use interactive tools and online games to teach financial skills and improve financial behavior. Australian Securities and Investment Commissions (ASIC) has an online game called TrackMySpend which help players understand the concepts of savings and budgeting. In 2019, during Singapore Global Money Week, school children learnt about financial goals and how to achieve them by savings and investment through a series of games.

Currently, the Government of India has established the National Centre for Financial Education (NCFE) to promote financial education in the country. However, NCFE uses tools like Quiz, Comics and Videos to promote financial literacy. It is strongly recommended that NCFE starts using gamification as one of the strategies to promote financial literacy. While designing the games, following considerations must be taken into account:

Well designed games: The objective of the financial game must be clearly defined. The mechanics, rules and goals of the game must adhere to the objectives. This will ensure that the financial game is effective and delivers the desired outcome.

Balance between fun and learning: The game should be interactive and immersive to ensure that the players not only enjoy the game but also gain valuable financial knowledge.

Age Appropriate: Games should be age appropriate. The complexities of the games should increase as they move from kids to teenagers to young professionals.

Gamification has the potential to empower individuals across all age groups to make informed financial decisions. Its strength lies in the fact that it can make learning an engaging and interactive experience. There are many games available on savings, budgeting, investment, trading, and borrowings which can be used to enhance financial skills. It is imperative that regulators, technology developers and financial institutions join hands in creating impactful gamified financial education solutions.