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One of the big hurdles of teaching personal finance to children and young adults is how to do so without boring or confusing them with lectures about compound interest and annual percentage rates.
Now there's a growing effort to reach and teach kids on their own turf: online games.
More than 70 percent of people play some form of game, and that percentage is far higher among teens. Gaming experts see this huge number of players as an opportunity to package critical lessons into an activity that people enjoy. Games, of course, won't replace other methods of teaching, but they might go a long way toward bringing finances to life when textbooks can't.
"Think about what games can do that you really can't do otherwise," says Ethan Mollick, an assistant professor of management at the Wharton School of the University of Pennsylvania. "Even in a personal finance class you don't get the chance to experiment, to be in the shoes of someone trying to solve problems. Games allow you to have the first-person experience."
Games already have been used successfully for training in other areas. Surgeons, for instance, worked faster and reduced errors after game simulations while truck drivers decreased their fuel consumption and accidents after playing driving games, says Mollick, who recently spoke at a meeting on the topic at the Annie E. Casey Foundation in Baltimore.
It's too soon to know if finances can be taught through games, which are generally free for players. But Mollick, an adviser on the Celebrity Calamity game, says early results are promising.
In Celebrity Calamity, you play the manager of a celebrity. Money falls down from the sky, which you must catch while making the purchases the celebrity demands. Your client stands off to the side, exhibiting happiness when you're doing a good job or turning anxious and angry when you screw up. (Tip: Pay attention to the rules on how to catch money, otherwise the celebrity will get mad fast.)
Doorways to Dreams, a nonprofit that aims to improve the finances of low- to moderate-income families, in February launched the game that targets women ages 18 to 32.
In testing, Doorways found that 55 percent of the players understood the meaning of annual percentage rate before playing, but afterward the figure climbed to 86 percent. Less than half of players understood finance charges before playing, while 82 percent did so afterward. And women said they felt more confident about handling finances after playing.
Nick Maynard, Doorways' director of innovation, says the group has tried to "make something, if you will, that tastes good and is good for you."
Doorways' plan is to create a library of games on various financial topics, he says.
Celebrity Calamity is a so-called casual game that's quickly learned and played, often by women. Other finance games are more complex.
Moneytopia takes you through 40 years of financial decisions from where to live and what clothes to buy to where to invest and what bills to pay. You can use cash, credit cards or high-cost payday loans. The game throws in an occasional surprise expense, like a wedding or birth of a child. And throughout an investment adviser offers tips.
The game was launched last year by the FINRA Investor Education Foundation for military service members ages 18 to 24 and their families, although anyone can play and learn.
"The neat thing about gaming is that you are in something of a fantasy world. You can decide to do things that you wouldn't do in real life and see what the consequences are without having to experience the pain," says Gerri Walsh, FINRA's vice president of investor education.
(Experimenting with how bad things could get, I frittered away a $55,000 investment account, had everything I owned repossessed, lived in a garage with my spouse and child and had $24.39 to my name. The game's investment adviser never got fed up with me; one in real life would have fired me as a client.)
For youngsters ages 8 to 14 and their parents, there's The Great Piggy Bank Adventure, a collaboration between Disney and Baltimore's T. Rowe Price Associates.
The game's lessons are about setting goals, saving and spending wisely, the impact of inflation, asset allocation and diversification. The goal is to collect as many truffles as possible to reach your financial goal. You can invest in three piggy banks representing cash, bonds and stocks. The returns vary with each round but are based on actual, historic returns in the markets, says T. Rowe's Stuart Ritter.
"Kids are not going to play this game and suddenly become experts on asset allocation. It gives them exposure to the concept," Ritter says. "It allows parents to then have more meaningful conversations (with children) than they might otherwise have."
(Tip: Until you get proficient, keep your goals modest and avoid store purchases. Watch out for the wolf!)
Now there's a growing effort to reach and teach kids on their own turf: online games.
More than 70 percent of people play some form of game, and that percentage is far higher among teens. Gaming experts see this huge number of players as an opportunity to package critical lessons into an activity that people enjoy. Games, of course, won't replace other methods of teaching, but they might go a long way toward bringing finances to life when textbooks can't.
"Think about what games can do that you really can't do otherwise," says Ethan Mollick, an assistant professor of management at the Wharton School of the University of Pennsylvania. "Even in a personal finance class you don't get the chance to experiment, to be in the shoes of someone trying to solve problems. Games allow you to have the first-person experience."
Games already have been used successfully for training in other areas. Surgeons, for instance, worked faster and reduced errors after game simulations while truck drivers decreased their fuel consumption and accidents after playing driving games, says Mollick, who recently spoke at a meeting on the topic at the Annie E. Casey Foundation in Baltimore.
It's too soon to know if finances can be taught through games, which are generally free for players. But Mollick, an adviser on the Celebrity Calamity game, says early results are promising.
In Celebrity Calamity, you play the manager of a celebrity. Money falls down from the sky, which you must catch while making the purchases the celebrity demands. Your client stands off to the side, exhibiting happiness when you're doing a good job or turning anxious and angry when you screw up. (Tip: Pay attention to the rules on how to catch money, otherwise the celebrity will get mad fast.)
Doorways to Dreams, a nonprofit that aims to improve the finances of low- to moderate-income families, in February launched the game that targets women ages 18 to 32.
In testing, Doorways found that 55 percent of the players understood the meaning of annual percentage rate before playing, but afterward the figure climbed to 86 percent. Less than half of players understood finance charges before playing, while 82 percent did so afterward. And women said they felt more confident about handling finances after playing.
Nick Maynard, Doorways' director of innovation, says the group has tried to "make something, if you will, that tastes good and is good for you."
Doorways' plan is to create a library of games on various financial topics, he says.
Celebrity Calamity is a so-called casual game that's quickly learned and played, often by women. Other finance games are more complex.
Moneytopia takes you through 40 years of financial decisions from where to live and what clothes to buy to where to invest and what bills to pay. You can use cash, credit cards or high-cost payday loans. The game throws in an occasional surprise expense, like a wedding or birth of a child. And throughout an investment adviser offers tips.
The game was launched last year by the FINRA Investor Education Foundation for military service members ages 18 to 24 and their families, although anyone can play and learn.
"The neat thing about gaming is that you are in something of a fantasy world. You can decide to do things that you wouldn't do in real life and see what the consequences are without having to experience the pain," says Gerri Walsh, FINRA's vice president of investor education.
(Experimenting with how bad things could get, I frittered away a $55,000 investment account, had everything I owned repossessed, lived in a garage with my spouse and child and had $24.39 to my name. The game's investment adviser never got fed up with me; one in real life would have fired me as a client.)
For youngsters ages 8 to 14 and their parents, there's The Great Piggy Bank Adventure, a collaboration between Disney and Baltimore's T. Rowe Price Associates.
The game's lessons are about setting goals, saving and spending wisely, the impact of inflation, asset allocation and diversification. The goal is to collect as many truffles as possible to reach your financial goal. You can invest in three piggy banks representing cash, bonds and stocks. The returns vary with each round but are based on actual, historic returns in the markets, says T. Rowe's Stuart Ritter.
"Kids are not going to play this game and suddenly become experts on asset allocation. It gives them exposure to the concept," Ritter says. "It allows parents to then have more meaningful conversations (with children) than they might otherwise have."
(Tip: Until you get proficient, keep your goals modest and avoid store purchases. Watch out for the wolf!)
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