When purchasing a new vehicle, there are many add-ons and customizations you can choose from. But while a sunroof, heated seats and built-in GPS may sound appealing, they all come at a cost. Choosing to spend money on additional features could result in the loss of another opportunity, such as the chance to take a road trip, see your favorite band play, or meet a pre-existing financial goal. These losses are known as the opportunity cost: the opportunity lost when you choose one option over another. It’s one of many subtle concepts that play an important role in personal financial management.
Illuminating these kinds of concepts is exactly what NOVA’s new lab is designed for. The online game, launched in February, allows students to practice making financial decisions and examine behaviors that influence how money is spent. And, ultimately, understanding how these decisions can enhance or block progress toward financial well-being.
The NOVA Financial Lab weaves real-world examples into a narrative structure, centering psychology and behavior by design. Unlike other financial literacy games, the lab focuses on behavioral principles related to spending and saving, and provides a context for applying new knowledge to develop healthy financial behaviors. The Science of Spending is broken down into three mini-games that allow players to identify common biases that arise when we think about money, and allow users to practice strategies to overcome them by taking care of a imaginary pet.
A 2018 study found that teens in Estonia, Finland, Canada, Poland, and Australia all scored higher on average than American teens on a financial literacy assessment. These findings come from the financial literacy portion of the Program for International Student Assessment (PISA), an international survey that collects data from 15-year-old students in 20 education systems around the world. The 2015 PISA survey found that one in five 15-year-olds in the United States lack basic financial literacy skills and knowledge of key concepts needed to make financial decisions.
One potential reason for gaps in financial knowledge is that many students do not learn about finances and money management in the classroom, but rather from their parents. Many American students acquire financial knowledge by observing and learning from their parents, and these financial skills are strongly linked to socioeconomic status.
It’s not all bad news: there’s been a push within public schools to equip students with the financial literacy they’ll need to take control and plan for their future. Today, American teachers have a wider range of after-school education programs and activities that they can use to teach financial topics such as debt accumulation, credit cards, and investing. . And high school students in 21 states are now required to take a personal finance course as a condition of graduation, according to the Council for Economic Education. But there is still a serious knowledge gap.
“The (PISA) study shows that a large number of our students (about a fifth in total) lack the skills to make prudent decisions about their personal finances and find it difficult to carry out daily tasks, such as determine the best value between two products on the market and how to respond to a phishing email that appears to be from their bank,” said Peggy G. Carr, associate commissioner for assessments at the National Center for Education Statistics, who administers the test in the United States, to CNBC in 2020.
While players in NOVA’s Financial Lab probably won’t need to sneak their pets into a concert or write out a retirement plan for them in real life, doing so in an interactive game can help them learn skills. concepts such as budgeting, interest and debt. “What we’re hoping people start doing is really thinking, ‘What decisions do I need to make now to make better decisions later?'” says Jonathan Corbin, senior behavioral researcher at the Center for Advanced Hindsight. from Duke University. Here’s a quick overview:
Game 1: In Cost of purchase, players are getting ready to go to the concert with their pet! But to sneak past them, they’ll have to make sure their pet passes for a human. With every item users purchase comes a challenge: how to maximize your pet’s happiness while staying within a budget. This scenario introduces players to an important financial concept called opportunity costloss of opportunity resulting from choosing one option over another.
Game 2: In Budget Buster, players discover the concept of mental accounting, a behavioral economics concept that explains how humans tend to assign a subjective value to finances, based on how the money was earned, how it was intended to be used, and how it influences The well-being. In Game 2, users will manage checking, credit, and savings accounts while caring for a pet over a six-month period. Along with buying essential and non-essential items to meet their pet’s basic needs and happiness, players have to deal with unforeseen circumstances such as medical emergencies. The game also introduces the 50-30-20 rule, a budgeting concept that involves spending 50% of income on essentials, 30% on non-essentials, and 20% on savings.
Game 3: In Exponential potential, the focus is on longer-term financial planning. When players glimpse the future of their pet, the outcome is not so good. Fortunately, players can go back in time to decide how to pay off their debts and make investments to maximize their net worth. Players’ success depends on mastering compound interest and using it to their advantage.
After each game, players earn a trophy for their pet and a tip on how to apply what they’ve learned to making real-life financial decisions. Money management is something we all have to deal with. Many factors are beyond people’s control, starting with the social and economic situation into which they are born. But when it comes to what you box control your behavior, a little insight and practice in overcoming the bad habits that undermine financial health that companies try to exploit can really pay off.
LAUNCH THE FINANCIAL LAB
Visit the Financial Lab Collection on PBS LearningMedia which includes a lesson plan, an instructional guide with instructions for navigating the game, and discussion questions for several of the game’s videos.