Learn to play the money game to grow your wealth


IMAG­INE that you have a sav­ings ac­count with an in­ter­est rate of 1 per­cent a year, while in­fla­tion an­nu­ally is run­ning at 2 per­cent. Af­ter one year, with the money in this ac­count, would you be able to buy more than you could to­day, less or ex­actly the same?

If you guessed that your money would be worth less than it did a year ago, you join the 64 per­cent of Amer­i­cans who an­swered this ques­tion cor­rectly. This in­for­ma­tion emerged out of a pi­o­neer­ing study de­signed by econ­o­mists Annamaria Lusardi and Olivia Mitchell mea­sur­ing fi­nan­cial lit­er­acy lev­els in the US in 2018. These econ­o­mists dis­cov­ered that only 30 per­cent of Amer­i­cans were able to an­swer all three of their ques­tions cor­rectly. Low lev­els of fi­nan­cial lit­er­acy were also preva­lent in de­vel­oped mar­kets such as Ger­many, the Nether­lands, Swe­den, Italy, Ja­pan and New Zealand.

In South Africa last year, re­searchers who have de­vel­oped their own in­dex found that be­low-av­er­age fi­nan­cial lit­er­acy is com­mon among women, young adults, high-school drop-outs, the un­em­ployed and peo­ple liv­ing in ru­ral ar­eas.

So what is fi­nan­cial lit­er­acy and why is it im­por­tant? Lusardi and Mitchell de­fine it as knowl­edge about a few but fun­da­men­tal fi­nan­cial con­cepts, while the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment says fi­nan­cial lit­er­acy re­quires hav­ing the skills and mo­ti­va­tion to make ef­fec­tive de­ci­sions.

The in­fla­tion sce­nario men­tioned is one of the “big three” ques­tions used to mea­sure fi­nan­cial lit­er­acy in more than 20 coun­tries. Once econ­o­mists had de­vel­oped a way to gauge fi­nan­cial lit­er­acy, they were able to in­ves­ti­gate whether knowl­edge ac­tu­ally in­flu­ences be­hav­iour.

Em­pir­i­cal ev­i­dence pub­lished by Lusardi sug­gests that peo­ple with fi­nan­cial savvy are more likely to ac­cu­mu­late wealth be­cause they are more likely to plan for re­tire­ment. Fi­nan­cial knowl­edge helps peo­ple to make in­formed de­ci­sions about spend­ing and re­tire­ment. This is why in­ter­ac­tive ed­u­ca­tional tools are grow­ing in pop­u­lar­ity here and abroad.

A study pub­lished in 2015 by Lusardi and her col­leagues sup­ports the no­tion that these tools are hav­ing a pos­i­tive im­pact.

Moneyver­sity by Old Mu­tual is an ex­am­ple of how videos, quizzes and in­ter­ac­tive games are teach­ing peo­ple about compound in­ter­est, bond re­pay­ments and sav­ing for re­tire­ment. Sim­i­larly, Fund­aba by FNB teaches peo­ple about en­trepreneur­ship and run­ning a busi­ness in a vis­ual, bite­sized way that uses an­i­ma­tion and in­fo­graph­ics to bring the busi­ness owner’s jour­ney to life.

Capitec’s Livin’ It Up app is a strate­gic game in which the user has to bal­ance daily ex­penses with as­pi­ra­tions of buy­ing big-ticket items such as a new home or car.

Apps and games are also chang­ing the face of fi­nan­cial ed­u­ca­tion by mak­ing it fun and ac­ces­si­ble for di­verse au­di­ences.

Glenn Gil­lis is founder of Sea Mon­ster, a South African an­i­ma­tion, gam­ing and aug­mented-re­al­ity com­pany.

| Sup­plied

CAPITEC’S Livin’ It Up app is a strate­gic game in which the user has to bal­ance daily ex­penses with as­pi­ra­tions of buy­ing bigticket items, such as a car.

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