By Glenn Gillis
Financial literacy, which can broadly be defined as the ability to understand financial concepts and make basic financial calculations, is vital for making informed financial decisions and achieving economic empowerment. But it’s a major challenge for millions of South Africans, irrespective of race, class, and education.
In fact, the most recent findings by the Financial Sector Conduct Authority (FSCA) reveal that financial literacy rates among South Africans remain shockingly low at just 52%. That’s hugely concerning and is probably a significant contributor to the fact that nearly half (46%) of the survey respondents stated that they tended to live for today rather than worry about providing for their future needs, with more than two-fifths (44%) not involved in any form of active saving.
Addressing these dire financial literacy levels will require a multi-pronged approach involving stakeholders across South Africa, making use of all the tools at their disposal. Among the most innovative and effective tools to tackle this issue are impact games.
The importance of financial literacy
Before looking at how impact games can help build financial literacy, it’s important to reiterate why financial literacy is so important.
Beyond just the ability to draw up budgets, track expenses, and set financial goals, being financially literate makes it easier to build confidence in financial decision making, and to avoid debt and responsibly manage credit. Empowering people with financial knowledge can also help people build entrepreneurship and business skills and increase overall economic participation.
Critically, in a country like South Africa, improved financial literacy can also help reduce wealth inequality and break the cycle of poverty. And in an unpredictable and volatile economic environment, financial literacy promotes stability and resilience. It enables individuals to plan for emergencies, build emergency funds, and protect themselves against financial shocks. Ultimately, financially literate individuals are better equipped to navigate economic downturns and adapt to changing circumstances which, in many ways, makes it a crucial survival skill.
Making finance engaging and fun
There are a number of underlying causes for South Africa’s low levels of financial literacy. One of the biggest is that it hasn’t historically been a major focus area for basic education providers. That, in turn, has resulted in generations of parents across the economic spectrum who are unable to pass on basic financial literacy skills to their children or to model good financial behaviour. Cultural norms can also play a role, with discussions around money often considered taboo.
As a result, when it comes time for people to start making their own individual financial decisions, things can very quickly feel complex and overwhelming. That’s not helped by the use of technical jargon, complex documentation, and intricate financial instruments within the industry, which can make it even more challenging for people to understand and navigate financial systems.
And that’s where impact games have a particularly powerful role to play. For those not familiar with the term “impact games”, you can think of them as games that are both entertaining as well as purpose driven, often underpinned by learning. Chances are, you’ve probably encountered them at some point in your life, whether in the course of your own education (or that of your child) or even as a workplace training tool.
By mirroring the dynamic interactions, structural complexities, and feedback loops associated with real-world situations and scenarios, impact games can help simplify complex systems and build financial understanding in ways that are fun and engaging. Games offer a space for users to fail safely and practice skills so that they are equipped to apply their learnings to real-world decision making.
For a field that can be as complex and difficult to understand as finance, that can be massively impactful.
A track record of success
All this is far from being conjecture or purely theoretical. A Finnish study showed a statistically significant association between improved financial literacy and gamified learning techniques. In the US, meanwhile, the San Francisco Federal Reserve released a game where the goal was to keep inflation and unemployment low by adjusting the federal funds rate. Researchers studying the game found that players emerged with an improved understanding of macroeconomic concepts.
Another study revealed that students who played a stock market game saw better levels of financial literacy than those who didn’t.
We’ve also seen it with our own clients, who’ve successfully used impact games to help young students learn how to budget, to make better financial decisions as adults, and to conquer whatever fears they might have around their finances.
Necessary interventions
Considering the state of the South African economy and the low levels of financial literacy in the country, it’s clear that immediate action from across society is required. Even if the economy were in a better place, the benefits of improved financial literacy would be a massive step in the right direction, empowering South Africans with invaluable skills and knowledge.
The financial sector and its products will forever be complex to most individuals, and it’s therefore critical that organisations empower their customers by supplying them with tools that can make information as easy as possible to understand in order to inform their decision making. Humans naturally learn through play and engage with playful design so when it comes to tackling difficult communication challenges and creating meaningful engagement between a company’s offering and the end user, it’s very difficult to beat the power of a well-designed impact game.
Gillis is CEO of Sea Monster
PERSONAL FINANCE