A MarketWatch study found that merely 57% of American adults meet financial literacy standards. Someone with financial literacy possesses the knowledge to make well-informed, money-related decisions based on an understanding of skills including managing personal finances, saving, budgeting and investing. The Financial Educators Council estimates that financial illiteracy costs Americans an average of over $1,500 annually as they incur avoidable expenses such as overdraft fees, credit card interest and excessive spending.
Nationally, the U.S. Department of the Treasury established the Financial Literacy and Education Commission in 2003 to help Americans achieve financial well-being. More recently, U.S. states have implemented efforts to teach children financial literacy in school, such as an amendment to the Education Code in Texas (SB 1063).
One innovative solution that has demonstrated some positive results is providing financial education using games that feature interactive digital simulation.
The development of interactive, simulated web and mobile games for the purposes of providing financial education essentially began based on the target demographic: kids in elementary or high schools. Data from the American Academy of Pediatrics indicates that more than 90% of children play non-educational video games and roughly 75% of family households in the U.S. have a gaming console.
Incorporating education into games with digital simulation is a means of communicating information to students using a mode or medium that kids are comfortable with. Moreover, the interactive nature of these games should better engage students, particularly compared to more traditional classroom lectures.
Educators increasingly teach children about budgeting, credit, investing and other elements of personal financial management using games. For example, Earn Your Freedom (EYF) is a Houston-based startup that recently introduced Money Quest, a financially oriented educational video game. The organization developed the game for youth, reflected in their messaging, such as “start early, plan early, be strategic and have fun.” Money Quest is set in the fictional city of Prosperity Point, and players participate in practical scenarios with financial challenges such as leasing an apartment, establishing a bank account and grocery budgeting.
Proactively educating students is needed, as these financial and economic concepts are not considered ingrained or instinctive skills and have largely been absent from the school curriculum. Evidence of the lack of financial literacy persists, and the financial challenges experienced among many young adults in the U.S. have garnered more attention. For example, the U.S. Federal Reserve reports that student loan debt rose from $828 billion in 2010 to more than $1.7 trillion in 2023. Nearly 20% of Americans between the ages of 30 and 34 are estimated to actively receive assistance from their parents to pay household bills.
A presentation during the 2023 International Conference on Applied Science and Technology on Social Science examined the effects of digital simulation games on improving financial literacy. It assessed their impact on responses, attitudes, actions and behavior. The authors believe that today’s economic world is increasingly complex; therefore, digital simulation games present financial information and concepts in a more simplistic manner that students can better understand.
Constructivism is an educational philosophy in which individuals best “construct” or build knowledge based on experiences or “hands-on” methods rather than simply receiving the material. The interactive nature of digital simulation games reflects a constructivist model.
Experiential learning is a form of constructivist learning where the student learns through the initial experience and may gain further understanding as they reflect on the experience. Many educators concur that experiential learning through digital simulation games is far more effective than verbal (lecture-style) methods. With digital simulation games, students gain experience managing their finances and the outcomes (rewards) of these decisions are quickly apparent.
The Education Development Center (EDU) reported on a financial literacy study involving Cha-Ching Money Adventures. Two groups of more than 200 fourth-grade students (ages 8 – 9) were randomly selected, and both initially completed financial literacy tests to establish a baseline. One of the two groups was assigned to play the game at home for two weeks.
Subsequent testing revealed that the control group (nonplayers) showed no notable improvement; however, those who played the game measurably improved their test scores. Further, students who successfully completed the game’s four levels or modules, which require more than one hour per day of play, exhibited further gains.
Another positive and unexpected finding was that 59% of the students who played Cha-Ching Money Adventures engaged in substantive discussions with their parents regarding financial topics. Many experts agree that students who understand these skills have financial education in school and less formal assistance from their parents at home.
Some of the other notable data (findings) that suggest digital simulation games are an effective means of providing financial education include:
Studies involving financial education provided to college students have shown that participants later had higher personal savings rates than nonparticipants.
Facilitated by the Securities Industry and Financial Markets Association, the SMG “virtual investment” game program involved students in grades 4 through 10 and ranged from 10 to 15 weeks in duration. The findings showed that knowledge regarding investing improved across students in all grades. The most significant impact was found in the improvement of mathematical skills among 4th and 5th-grade participants.
A randomized study involved students between the ages of 9 and 13 in the Netherlands using the Cash Quiz game as part of a more extensive Money Week program. Cash Quiz, which covered skills including banking, savings, borrowing and risk, used an eight-question quiz to assess results. Participants successfully answered .32 more of the eight questions correctly.
Financial simulation games have shown to be effective at improving a student’s knowledge, yet simply having this knowledge might not translate to their actual financial behavior. Despite having knowledge regarding sound financial principles, some people still fail to apply this knowledge in their lives.
Many of these young students will not have opportunities to apply their financial knowledge for many years; therefore, determining the impact on financial behavior is likely unknown.
Studies often measure these behavioral outcomes based on whether a participant accrues student loan debt. Critics suggest that some high school students who completed the financial literacy training originally had no intentions of pursuing a college or university education. Based on the “return on investment” knowledge gained during the financial literacy program, the student may have determined that financing their education is worthwhile.
Americans clearly lack sufficient financial literacy skills; thus, additional emphasis is needed in education. Providing children with financial education using games that feature digital simulation is a worthwhile strategy for instilling this knowledge.
Kids today are familiar with gaming platforms and technology, and they engage students better in an active and more fun alternative to traditional classroom educational methods. While these digital tools effectively provide students with this important knowledge, whether or not these skills are applied to their behavior in adulthood is difficult to determine.
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