How Parents Can Use Storytelling To Raise Financially Literate Children

Retirement

Does it irk you to no end seeing your kid stare at the screen for hours on end playing a pretend game? Do you think your child will live a healthier life playing a real game outdoors instead? Are you driven up the wall watching your youngster get irrationally angry at a mindless set of bits and bytes whenever the game wins?

Well, you might reconsider your view of this behavior. In fact, if you understand anything at all about jiu-jitsu, you can probably leverage this gaming inertia in a way that makes your child a lot smarter when it comes to money.

Face it, most video games are already conditioning your special boy or girl to better understand the fundamentals of finance. After all, how else can players “upgrade” their character if they don’t accrue enough points to spend at the game’s store?

That’s math. That’s money. It’s still make-believe. But it’s a start.

Now, if only you can use the same techniques found in popular video games to condition your kids about real money…

(Hint: You can. And it’s incredibly natural and easy.)

Dr. Sandra Loughlin is a learning scientist and organization change expert. As Head of the Learning Practice at EPAM

EPAM
Systems, Sandra is responsible for integrating EPAM’s many internal and external educational activities under one umbrella and ensuring that they reflect the latest advances from the learning sciences.

Before that, though, Sandra held faculty appointments in colleges of business and education at the University of Maryland and advised several EdTech startups. (She holds a Ph.D. in educational psychology and learning analytics from the University of Maryland and a master’s in education from Harvard University, so you know this is somebody worth listening to on this subject.)

She was kind enough to answer a few questions. These are the kind of questions whose answers can pep up your dinner table/car ride conversations and, at the same time, lay the groundwork for launching your child on the path towards financial success.

Best yet, you’ve already been doing this, ever since you started reading your baby bedtime stories.

Question #1: Dr. Loughlin, we’re all familiar with Aesop’s Fables, short stories parents would read to young children to teach them valuable life lessons. What makes storytelling such an effective teaching and learning tool?

Storytelling is an incredibly effective teaching tool because it replicates facts and concepts we experience in the real world—integrated into a historical and cultural context with personalities, motives, events, decisions and consequences. They’re memorable, especially when interjected with humor, surprise or emotion. In fact, I’d argue that storytelling is the only way to effectively teach big concepts like delayed gratification or the Golden Rule because they unfold via myriad events over time. Stories are perfect for that.

They are also incredibly durable. How many times have you, as a parent, naturally defaulted to explaining big concepts to your children by repeating fables and parables learned in your own childhood? When you think about that, it’s kind of remarkable. Not only do parents remember the stories—most of which they probably haven’t encountered for 30+ years—but they can recognize the teachable moments and leverage the best tool for instruction. This is the power of Aesop’s fables and other stories that have endured for millennia.

Question #2: Break it down for us. What exactly are the key components of storytelling?

If you search for “story elements,” you will see various lists outlining three to ten elements. Aristotle, for instance, said there were seven. Personally, I see three universal elements to stories: the main character, a conflict and a resolution. In other words, a story consists of a character (or two) that faces and overcomes a challenge. That’s a story in a nutshell.

What’s really interesting to me about stories are the different types of conflict. Most people, when they think of stories, go immediately to a bad guy—the Joker or the evil stepmother. But that’s only one type of story. Characters can also be pitted against nature, machines, fate, society and themselves. All of these types of conflict can create gripping, emotional narratives that keep you on the edge of your seat.  

Question #3: What you describe sounds just like what we experience when reading a good book, watching an exciting movie or even binge-playing an infatuating video game. In fact, some of the most popular video games are now produced just like movies. They are heavily immersed in the art of storytelling. Can you explain why there is this link between storytelling and gaming?

Video game designers are no dummies when it comes to human psychology. In fact, top-tier video game companies put psychologists and neuroscientists on development teams to maximize the enjoyment and persuasive power of games. So, it’s no surprise that some of the most successful video games on the market use story to drive engagement. But there’s a big difference between a story you read or watch and a story-driven video game—now you’re in the driver’s seat. Instead of passively watching the main character respond to challenges, you have to monitor the adversary, make split-second decisions and apply strategy to overcome the adversary. This is what we naturally do when watching or reading a story. How many times have you rolled your eyes at a character who makes the same mistake again and again or yelled at the television, “Are you crazy? Don’t go in there!” A well-designed, story-driven video game lets you make the choices. They allow you to try and fail and try and fail until you get it right. This experience works chemically on the brain, creating surges of adrenaline and floods of dopamine. And that just makes us want to play some more.

Question #4: On to the nitty-gritty: money talk. Many have complained about the lack of financial literacy among the adult population and point to the lack of curriculum at the secondary school level as a reason why. Can story-based video games help?

I love this question because I’m one of the complainers! It’s appalling that, as a society, we don’t teach kids some of the foundational skills they need to be successful, independent adults. Cooking, laundry, gardening, car care, finances… They get overlooked, and young people struggle because of it.

So, yes, financial literacy is a huge problem, and, yes, story-based video games can help. If you think about it, your financial circumstances have all the elements of a story. As the main character, you have to take into account many factors, make uncertain decisions, face expected changes in the market, and deal with the consequences. Real-life has it all: strategy, excitement, surprises, wins and losses. A well-designed, story-driven video game can take all of the real-world excitement of financial decision-making and add a critical, instructional dimension: do-overs.

It takes a long time—and actual financial risk—to learn critical concepts in the real world. But a video game compresses that timeline and gives kids a chance to try out several approaches and see the consequences of each one. And, if you do it right, a financial video game can be incredibly fun.

Question#5: So, are video games enough? What role do parents and teachers play?

Video games are amazing, but they aren’t a magic bullet for financial literacy. This has been borne out by previous research. Several recent studies looked at the impact of financial video games on real-world financial decision-making, and they show minimal effects. Most people would hear this and conclude that financial video games are worthless. But, as a learning scientist, I’m not surprised or disheartened. Very few instructional tactics by themselves transfer into practice. This doesn’t mean that financial video games are worthless; it means they aren’t sufficient. To really teach financial literacy, games should be combined with directed and ongoing conversations with financially literate adults, ideally parents.

Financial literacy is based on several core concepts. This is stuff like not putting your eggs in one basket, letting your money make you money and knowing when and how to take risks. Yes, there is also some degree of math involved to understand finance. But I’d argue that the math part is relatively easy to learn and of secondary importance to the core principles, which are universal and can be understood at an early age.

The best way to teach children these financial concepts is by turning your financial history and current situation into a series of stories. Talk over the dinner table about your financial past, highlighting critical decisions and challenges you’ve faced. During these conversations, be sure to highlight the adversary—this is usually yourself—and the concept the story illustrates. 

I want to also acknowledge that this whole idea of talking to kids about money is uncomfortable for some parents. If you’ve made poor financial decisions in the past, it could be hard to acknowledge that. It’s even harder if you’ve experienced a financial setback and have to acknowledge a mistake. Discussing money can also be difficult for well-off parents, especially those who have close friends or family with fewer means. We all want to raise compassionate and humble kids, and some parents avoid talking about money because they want to downplay the inevitable comparisons.

But, in the long run, talking openly about money is the best way for kids to learn how to handle it.   

Question #6: Now for a specific example. Assume the child is a teenager who has a job. The parents want to encourage the teen to learn the discipline of working for someone else, so they like the idea of the teen spending those hard-earned bucks on some enticing thing. But the parents, who understand the fantastic power of long-term compounding, also want their teenager to develop a habit of saving. How might storytelling and gamification work hand in hand to achieve this objective?

Ideally, kids would start learning about personal finance as young children by earning money for chores, having them pay for or contribute to purchases of games and toys and having a savings goal. In this situation, the concept of saving has already been introduced.

But let’s say that wasn’t the case, and a teen is learning this lesson for the first time. As a parent, you would start trying to encourage and convince them, which is where storytelling and gamification can help. If you haven’t talked to your teen about savings before, now is the time. Tell the story of your first job and how you handled it. Did you save? Why? How much? What were the consequences of generating (or losing out on) the power of compounding? What did you learn? Be honest about tradeoffs—choosing to save means your teen won’t have as much money to spend on “fun” stuff. Offer advice on handling the emotions of that eventuality.

Gamifying the situation will sweeten the pot. Sit down with your teen and use free savings calculators to show how their money will grow by college or how quickly they’ll be able to save for a big purchase. Further, encourage savings by creating little quests or increasingly challenging savings goals. For instance, the first goal could be opening a savings account, for which they are rewarded with a celebratory ice cream sundae trip. The next goal could be saving their $100, which earns them a $25 matching contribution from you, and so on. You can also signal your appreciation of your teen’s saving efforts by implementing random rewards, like surprising her with the shoes she’s been admiring. The key is to tie the reward to your teen’s saving behavior. These are just a couple of ways to gamify saving, turning it into a lifetime habit.

Question #7: Finally, why is it critical parents take on the role of a “money coach” rather than rely on some textbook or mobile app to teach their children good financial habits?

I love the concept of a “money coach;” that’s a perfect descriptor of the ideal role parents play in their kids’ financial education. Parents are the first and most powerful teachers children will ever have. A textbook is gone after the school year, and mobile apps can be mastered. But a family’s financial story is unfolding in real-time and is constantly being challenged by circumstance. Parents have the opportunity to augment academic knowledge and fun-but-not-real games into stories and concepts that have incredible durability and staying power.

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