Playing games has been humanity’s de facto way to unwind for centuries. For as long as civilised nations have existed, we’ve been playing games to socialise, challenge our brains (and bodies, in some cases), and, well, play! But did you know that the games we play for entertainment are also a great educational resource, particularly when it comes to personal finance?
Financial Lessons from Video Games
Here in 2023, video games are quite possibly the world’s most popular form of entertainment. As well as being immersive and engaging to play, modern video games can provide us with valuable insights into money management and how to build capital. The great thing about finding financial lessons when playing video games is that you’ll be learning without even realising it due to the immersive and enjoyable experience of the games themselves.
Smarter Money Management
Games like The Sims and Animal Crossing have won awards and commercial and critical acclaim alike for the practical skills they teach players. These two titles are also especially good at providing practical lessons in money management, requiring players to invest in property, furniture, food and other essentials and pay taxes along the way – all with a limited starting budget.
One of your first objectives when playing games like this will be to generate a source of income, diversify it and acquire the required knowledge you’ll need to keep building your resources. As in the real world, in the virtual world of Animal Crossing, you’ll have to deal with mortgages, while you’ll have the option to take out and manage a personal loan in The Sims. Managing your money well is crucial to ensure you keep up the repayments in the gaming universe, a lesson that can be directly applied to daily life.
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Financial Lessons from Card and Board Games
Card and board games are some of the oldest games played by humankind on record. Historians have discovered that one of the first types of board games was played in 2600 BC in ancient Mesopotamia. As it was known, the Royal Game of Ur was a two-player board game that even weaved fortune-telling into its rules.
Card games, too, are hundreds of years old. Even the game of poker, now a core sector in the modern iGaming industry, could be based on a 10th-century Chinese card game played in the royal court.
Despite these traditional games being around for centuries, they can still teach essential lessons in financial management.
Managing Risk
Anyone who’s ever played poker at a casino or engaged in poker matches online will confirm that learning how to manage risk is a fundamental element of the game. While it would be impossible to eliminate risk entirely from the game, you nevertheless need to understand how to take calculated risks when making plays. Success at poker requires patience and restraint, and a good understanding of when to go all-in, when to check, and when to cash out.
This same approach to risk management can be applied to any type of financial investment, whether that’s investing in the stock market or purchasing a new car or home. There’ll always be an element of risk to each of these investments; you need to learn how much you can afford to invest and lose before it damages your financial portfolio.
Focus on Cash Flow
Monopoly is a staple board game, and it offers plenty of financial wisdom that you can easily apply to your personal finances in the real world. The game itself is a capitalist’s dream: you start off with a small pot of money and need to increase your bankroll to remain the last player standing. One of the key lessons it can teach us is how to effectively manage cash flow.
The four train stations (or railroads in the US edition) are the most valuable properties on the board regarding the generation of cash flow. Each station costs £200 (or $200) to purchase, but by owning all four, you’ll be able to collect rent at a 25% return – boosting your cash flow and netting you passive income to boot.
This methodology can easily be applied to your financial investments.
While stock assets increase in value over time based on their cash flows, the same can be said for savings bonds and accounts that deliver a higher interest rate. It’s prudent, then, to move forward on those investments that give you a percentage back of what you put in.
Monopoly also teaches us an important lesson on diversification. Even if you purchase the most expensive property on the board and fill it with hotels, you won’t win much as the game progresses. Similarly, spreading yourself too thin by trying to buy up every property will lessen your chances of profitability.
This is the same when investing; you expose yourself to greater risk by choosing just one or two stocks, but you can also dilute your gains by trying to own too many. A well-balanced, diversified portfolio should contain 15 to 20 assets, with an appropriate amount invested in each.
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