- One of my earliest lessons in money management came not from my parents or teachers, but from a game: "Monopoly."

While my sister went into debt, buying every piece of property she could get her hands on, I focused on becoming a railroad tycoon.

Owning all four railroads got you $200 every time someone landed on one, not a lot, but a nice, steady stream of income.

Meanwhile, I kept a lot of cash on hand and spent as much time in jail as possible.

This didn't always result in victory, but it did teach me the value of an emergency fund.

No matter how many properties my sister owned, without any liquidity, just one bad roll could throw her into a debt spiral she'd never recover from.

- America currently ranks 14th amongst wealthy nations in financial literacy.

Roughly 2/3 of young adults don't understand basic financial concepts, like inflation and risk diversification.

Why?

Most schools don't have dedicated personal financial courses.

And only about half of parents say they feel comfortable discussing money with their kids.

- But there is one place young people have more opportunities than ever to learn financial concepts: games.

"Monopoly" is far from a perfect real estate simulator, but it is the first place I ever heard the words mortgage, deed, and rent.

Other board games from our childhood like "Pay Day" and the "Game of Life" taught us about budgets, salaries, taxes, and retirement, and we didn't even know we were learning anything.

We were just having fun.

- Though these games are old-fashioned by today's standards, you could argue that money is more prevalent than ever in game design.

There are a lot of financial lessons being learned and habits being formed in modern games, and they're not all good ones.

- But educators are starting to see the potential in gaming to teach young people how to manage their money better, and hopefully, close that financial literacy gap.

(bright music) Back when "Super Mario Brothers" first came out, in 1985, video game money was very simple.

You collect coins, and when you get to a hundred, they're automatically traded in for an extra life.

Since there was nothing else you could do with them, there were no decisions to make.

Today, virtually every game asks you how you wanna spend your money: do you wanna buy some more health potions or upgrade your armor?

Increase your spell slots or get a cute hat for your cat?

- These decisions can teach kids the importance of saving up for a desired purchase and a rudimentary understanding of opportunity costs: the concept that every purchase you make comes at the cost of what you could have spent that money on instead.

And though that money may be imaginary, if you've spent hundreds of hours grinding in "World of Warcraft," like I have, you take those decisions very seriously.

- Grinding?

- Yeah, it means doing mundane, repetitive tasks for hours on end to earn money.

- I guess that's kind of a life lesson?

Since the late '80s, simulation games have taken game economics to a new level, allowing players to build and manage everything from farms and amusement parks to cities and entire civilizations.

Budgeting is a huge part of these games, requiring players to balance income and expenditures while leaving enough leftover to reinvest in expansion and save up for the unexpected disaster.

- Interestingly enough, one of the most fiscally advanced games of recent years is also one of the cutest: "Animal Crossing: New Horizons" places you on a picturesque little island populated by adorable talking animals.

And one of the first ones you meet informs you that you owe him money.

That's right.

You start the game with a mortgage and have to immediately start hustling to pay it off by harvesting flora and fauna and selling it for a currency called bells.

- The game also contains an example of the economic principle known as arbitrage, in that, you can sell your resources of other people's islands where they're more rare, and therefore, fetch higher price.

There's even a "stalk market" where prices fluctuate, and you have to time your selling for maximum profit.

Though, in the real world, trying to time buying and selling on the stock market is a dangerous practice.

Not recommended for novice players.

- But video games don't just use imaginary money, real dollars, and lots of them, are being spent on in-game merch, whether that's within the game itself or on one of the many external marketplaces for rare items that have sprung up online.

A lot of these digital goods aren't even useful, they're purely superficial, like "Fortnite" skins and emotes.

This may teach the unfortunate lesson that money's primary purpose is to acquire external symbols of status.

- Conversely, some kids are actually making money within games.

One of the most popular games in the world right now, "Roblox," is actually more of a digital marketplace where anyone can design their own experience and charge others to play it.

Though they advertise lucrative earning potential, the company actually takes over 75% of all sales, far more than any other game distribution platform.

- According to a report by "People Make Games," these Robux lose a lot of their value when they're converted into real dollars, which encourages creators to spend their earnings within the game.

The authors of the report compare it to the mining camp policy of paying workers in a currency that can only be spent at the company store, a practice that is now illegal IRL.

Being exploited for one's labor by a giant corporation could be seen as a valuable money lesson, but only if a parent or other adult is willing to help you make sense of what's going on.

- Most of the games we've talked about impart financial lessons as a side effect but financial educators are starting to design games with the explicit purpose of teaching young people about money.

- Our friends over at NOVA Labs recently released a few of their own.

Here to tell you more about the Financial Lab is Yanely Espinal.

- Rather than overloading players with a bunch of math and terminology, NOVA's games focus on the psychology of money, specifically the intention gap: the difference between what we know we should do and what we actually end up doing.

They try to help players identify and overcome the mental biases that lead to common money mistakes, a field often referred to as behavioral economics.

Our first game focuses on opportunity costs, reminding players that when judging the value of a purchase, you must incorporate the loss of what you won't be able to spend that money on in the future.

The second game deals with mental accounting: the strategy of dividing up your income and expenses into different categories.

Mental accounting can be helpful when designing a budget, but it can also blind you to the fact that money is fungible.

And the third game teaches you that compound interest can be both your best friend and your worst enemy, depending on which side of the balance sheet it's on.

Playing all three games is a great way to practice making decisions about how to spend your money in the short, medium, and long-terms.

And I'm sure you'd agree, we could all use a little practice.

- As a regular viewer of "Two Cents," I'm sure you'll have no trouble acing the NOVA Financial Lab.

Although I did have to do the last game a couple times to get the top trophy.

- Which is good.

Part of the teaching power of games is that they're repeatable.

From puppies play fighting to haggling over Park Place, games allow us to practice important life skills and make mistakes without serious life consequences.

- [Both] And that's two cents.

- [Julia] Thanks to our patrons for keeping "Two Cents" financially healthy.

Click the link in the description to become a "Two Cents" patron.

(bright music) - Head on over to the Nova Financial Lab, and let us know how you did.

Link in the description.

(bright music)