- One of my earliest lessons in money management
came not from my parents or teachers,
but from a game:
"Monopoly."
While my sister went into debt,
buying every piece of property she could get her hands on,
I focused on becoming a railroad tycoon.
Owning all four railroads got you $200
every time someone landed on one,
not a lot,
but a nice, steady stream of income.
Meanwhile, I kept a lot of cash on hand
and spent as much time in jail as possible.
This didn't always result in victory,
but it did teach me the value of an emergency fund.
No matter how many properties my sister owned,
without any liquidity,
just one bad roll could throw her
into a debt spiral she'd never recover from.
- America currently ranks 14th amongst wealthy nations
in financial literacy.
Roughly 2/3 of young adults don't understand
basic financial concepts,
like inflation and risk diversification.
Why?
Most schools don't have
dedicated personal financial courses.
And only about half of parents say
they feel comfortable discussing money with their kids.
- But there is one place young people
have more opportunities than ever
to learn financial concepts:
games.
"Monopoly" is far from a perfect real estate simulator,
but it is the first place I ever heard the words mortgage,
deed, and rent.
Other board games from our childhood
like "Pay Day" and the "Game of Life"
taught us about budgets,
salaries, taxes, and retirement,
and we didn't even know we were learning anything.
We were just having fun.
- Though these games are old-fashioned by today's standards,
you could argue that money is more prevalent
than ever in game design.
There are a lot of financial lessons being learned
and habits being formed in modern games,
and they're not all good ones.
- But educators are starting to see the potential in gaming
to teach young people how to manage their money better,
and hopefully, close that financial literacy gap.
(bright music)
Back when "Super Mario Brothers" first came out,
in 1985,
video game money was very simple.
You collect coins,
and when you get to a hundred,
they're automatically traded in for an extra life.
Since there was nothing else you could do with them,
there were no decisions to make.
Today, virtually every game asks you
how you wanna spend your money:
do you wanna buy some more health potions
or upgrade your armor?
Increase your spell slots
or get a cute hat for your cat?
- These decisions can teach kids
the importance of saving up for a desired purchase
and a rudimentary understanding of opportunity costs:
the concept that every purchase you make comes at the cost
of what you could have spent that money on instead.
And though that money may be imaginary,
if you've spent hundreds of hours
grinding in "World of Warcraft,"
like I have,
you take those decisions very seriously.
- Grinding?
- Yeah, it means doing mundane, repetitive tasks
for hours on end to earn money.
- I guess that's kind of a life lesson?
Since the late '80s,
simulation games have taken game economics to a new level,
allowing players to build and manage everything
from farms and amusement parks
to cities and entire civilizations.
Budgeting is a huge part of these games,
requiring players to balance income and expenditures
while leaving enough leftover
to reinvest in expansion
and save up for the unexpected disaster.
- Interestingly enough,
one of the most fiscally advanced games of recent years
is also one of the cutest:
"Animal Crossing: New Horizons"
places you on a picturesque little island populated
by adorable talking animals.
And one of the first ones you meet informs you
that you owe him money.
That's right.
You start the game with a mortgage
and have to immediately start hustling to pay it off
by harvesting flora and fauna
and selling it for a currency called bells.
- The game also contains an example
of the economic principle known as arbitrage,
in that, you can sell your resources
of other people's islands
where they're more rare,
and therefore, fetch higher price.
There's even a "stalk market" where prices fluctuate,
and you have to time your selling for maximum profit.
Though, in the real world,
trying to time buying and selling on the stock market
is a dangerous practice.
Not recommended for novice players.
- But video games don't just use imaginary money,
real dollars,
and lots of them,
are being spent on in-game merch,
whether that's within the game itself
or on one of the many external marketplaces
for rare items that have sprung up online.
A lot of these digital goods aren't even useful,
they're purely superficial,
like "Fortnite" skins and emotes.
This may teach the unfortunate lesson
that money's primary purpose
is to acquire external symbols of status.
- Conversely,
some kids are actually making money within games.
One of the most popular games in the world right now,
"Roblox," is actually more of a digital marketplace
where anyone can design their own experience
and charge others to play it.
Though they advertise lucrative earning potential,
the company actually takes over 75% of all sales,
far more than any other game distribution platform.
- According to a report by "People Make Games,"
these Robux lose a lot of their value
when they're converted into real dollars,
which encourages creators
to spend their earnings within the game.
The authors of the report compare it
to the mining camp policy of paying workers in a currency
that can only be spent at the company store,
a practice that is now illegal IRL.
Being exploited for one's labor
by a giant corporation could be seen
as a valuable money lesson,
but only if a parent or other adult
is willing to help you make sense of what's going on.
- Most of the games we've talked about
impart financial lessons as a side effect
but financial educators are starting to design games
with the explicit purpose
of teaching young people about money.
- Our friends over at NOVA Labs
recently released a few of their own.
Here to tell you more about the Financial Lab
is Yanely Espinal.
- Rather than overloading players
with a bunch of math and terminology,
NOVA's games focus on the psychology of money,
specifically the intention gap:
the difference between what we know we should do
and what we actually end up doing.
They try to help players identify
and overcome the mental biases
that lead to common money mistakes,
a field often referred to as behavioral economics.
Our first game focuses on opportunity costs,
reminding players that when judging the value of a purchase,
you must incorporate the loss
of what you won't be able to spend that money on
in the future.
The second game deals with mental accounting:
the strategy of dividing up your income and expenses
into different categories.
Mental accounting can be helpful when designing a budget,
but it can also blind you
to the fact that money is fungible.
And the third game teaches you
that compound interest can be both your best friend
and your worst enemy,
depending on which side of the balance sheet it's on.
Playing all three games
is a great way to practice making decisions
about how to spend your money in the short, medium,
and long-terms.
And I'm sure you'd agree,
we could all use a little practice.
- As a regular viewer of "Two Cents,"
I'm sure you'll have no trouble
acing the NOVA Financial Lab.
Although I did have to do the last game a couple times
to get the top trophy.
- Which is good.
Part of the teaching power of games
is that they're repeatable.
From puppies play fighting
to haggling over Park Place,
games allow us to practice important life skills
and make mistakes without serious life consequences.
- [Both] And that's two cents.
- [Julia] Thanks to our patrons
for keeping "Two Cents" financially healthy.
Click the link in the description
to become a "Two Cents" patron.
(bright music)
- Head on over to the Nova Financial Lab,
and let us know how you did.
Link in the description.
(bright music)