Video Games Aren't So Bad After All

Next time you're tempted to lecture your kids about wasting too much time on video games, first check out which games they're playing -- it turns out they may actually be learning important life lessons.

Much academic research has been done on whether online games and other interactive educational tools can teach people how to make better decisions regarding personal finances. One school of thought called "game-based learning" theorizes that video games with strong narrative storylines and goal orientation can teach children (and adults) important skills by helping them develop an awareness of the consequences of their actions.

Those of us who toil in the fields of financial literacy welcome any hard evidence that our efforts make a difference, so I was particularly gratified by the results of a recently released study, Improving Americans' Financial Literacy: Educational Tools at Work, written by Lisa A. Donnini, PhD, along with KayAnn Miller and Kitch Walker.

Their white paper, which was underwritten by my employer, Visa Inc., compares the credit performance of thousands of college students who opened Wells Fargo credit card accounts in two categories: Those who completed an online financial tutorial on the wise use of credit prior to being issued their card; and those who did not. (The tutorial was based on content from Practical Money Skills for Life, a financial literacy program run by Visa.)

Wells Fargo analyzed each account's performance more than a year after they were opened and found that, as a whole, cardholders who took the tutorial demonstrated dramatically better credit behavior than those who did not. The results were eye-opening. Those who completed the tutorial:
  • Had revolving monthly balances that were 20 percent lower than those who did not.
  • Were 44 percent less likely to be 60 days delinquent on payments.
  • Experienced FICO credit score increases that were 240 percent better.
  • Were 23 percent less likely to have late fees.
  • Were 51 percent less likely to file for bankruptcy.

These data provide tangible evidence of what many financial literacy practitioners have long believed: that financial education intervention given at the right teachable moment -- in this case, immediately prior to opening a credit account -- works.

So what has this to do with video games? According to Dr. Donnini, "One reason educational, online interventions can lead to such dramatic changes in behavior as seen in the Wells Fargo case study has to do with how people learn in an online environment, especially when that environment includes games, other competitive opportunities or potential interaction with peers."

She continues, "Children have always learned through play, researchers say, and today, digital media has resulted in increasingly more sophisticated games that can engage youth while at the same time encouraging learning."

In fact, many would suggest that the key components of good video games, including immediate feedback, rewards, motivation and goal-setting, may be a better fit for the modern, high-technology, global world in which today's kids live than the more traditional types of learning often found in the classroom.

The paper also cites a University of Florida study that showed students can take what they learn from games and apply it in other environments, including standardized tests. Over an 18-week period, students playing educational video games demonstrated higher gains on district benchmark exams than those not playing the games -- on average, the game-players' scores improved by 8.07 points (out of 25), compared to gains of only 3.74 points in the control group.

According to Donnini, "One reason for the greater gain is that games provide immediate feedback when things go wrong and rewards when they do not." This finding was borne out by another exercise cited in the report: The office of West Virginia State Treasurer John Perdue distributed Financial Football, an interactive video game jointly developed by Visa and the National Football League, to 563 students at 17 high schools.

Before playing the game, 53 percent of the students answered half or more of basic financial questions correctly; after playing the game, 92 percent were able to answer these and more sophisticated questions correctly. "This was the result of having been exposed to the information repeatedly as they attempted to improve their scores in the game," concludes Donnini.

Some of the better educational video games for various age groups I've seen include:
  • Bad Credit Hotel, where visitors to a haunted hotel gather clues on how to avoid bad credit, ultimately leading to a stay in the coveted Room 850 (the top FICO credit score).
  • Money Metropolis, a new Practical Money Skills game that lets kids ages 7 to 12 navigate a multi-dimensional world, making life decisions that will affect whether their virtual bank account shrinks or grows.
  • Peter Pig's Money Counter, where kids ages 4 to7 can practice sorting and counting coins with the help of wise Peter Pig.
  • Planet Orange, an outer space-themed game where 1st to 6th graders can learn about earning, saving, spending and investing.
  • You Are Here, an animated site where 5th through 8th graders wander through a virtual "mall," playing games and learning key consumer concepts such as the impact of advertising, how to spot scams and protect personal information.
  • Financial Soccer, which incorporates soccer's structure and rules to teach children and young adults the knowledge and tools they'll need to establish and maintain sound financial habits over a lifetime.

Bottom line: Although nothing beats playing in fresh air, there are plenty of electronic games that can teach your kids the skills they'll need to manage their personal finances.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

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