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Saturday, May 15, 2021

How Gamification Can Help You Meet Your 2021 Financial Goals

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It’s not rocket science that achieving goals—even little ones like walking 10,000 steps in a day—feels great. It is, however, rooted in psychology. Meeting small, daily goals with help from a device like a Fitbit taps into the brain’s pleasure centers associated with rewards. Collectively, those little dopamine hits serve as future motivation to nurture healthy habits.

Now, a slew of platforms are trying to replicate the gamification of physical fitness for financial wellness. The idea is that people are more likely to meet their savings goals if they can tap into their brain’s reward circuitry via small, incremental and easily achievable “wins.”

While there’s a fine line to walk when applying a competitive mindset to money matters, early studies suggest there may be benefits: In 2016, when Walmart rolled out its MoneyCard prize-linked savings (PLS) program, they found that users ended up saving 35% more on average than the control group.

Here’s a quick overview of the trend of gamification, what it means in the context of personal finance and a few ways you can safely apply the psychology of gaming to your spending and saving habits.

What Is Gamification?

Gamification means creating challenges, competitions and rewards around certain aspects of your life like your carbon footprint or level of hydration. The process involves setting goals, tracking progress and hitting milestones to unlock some kind of reward, which may range from cash incentives to new features for a digital avatar. Gamified apps often employ a “PLB”—points, leaderboards and badges—model to motivate users.

Gamification has been a trend in the tech world for many years. The buzzword crops up in industries ranging from healthcare to recycling to corporate wellness. Recently, employers have been experimenting with gamification to improve productivity among work-from-home employees. In the financial realm, there are a number of apps and digital services that use gamification to encourage users to save money, budget better or improve financial literacy.

Many apps with gamified elements claim pretty significant metrics of success: Digit, for instance, an app that helps people automate their savings, notes on its website that it’s helped users collectively save more than $5 billion. The app, which costs $5 a month after a free trial, offers gamification features including “savings bonuses”—extra cash deposited into users’ accounts based on their average daily balance over a three-month period.

Gamification isn’t just a digital tactic. You can gamify your savings, budget or investments in analog ways, too. For instance, embarking on a “no spend challenge,” competing with your partner to see who spends less in a week or placing bets with your family on how long it will take to fill up a change jar are all forms of gamifying financial tasks.

Is Gamifying Your Finances a Good Idea?

The gamification trend has come under fire in certain contexts. In a world where Reddit is a platform for trading advice, and Dogecoin—a cryptocurrency featuring a Shibu Inu from a popular internet meme as its logo—has transcended joke status, there’s plenty of anecdotal evidence of the darker side of the gamification rabbit hole. Playing with your life savings is a far cry from tinkering with avatars on Animal Crossing.

For some people, the line for when, where and how to experiment with gamifying investments and other assets may be murky. It is possible to get addicted to video games, after all. While most gamified financial apps are relatively benign and focus on saving cents on the dollar—not minting millionaires—people with a history of problematic gambling may want to steer clear anyway.

There are also a few ways to ensure that financial gamification aligns with your lifestyle and long-term goals. First, research any apps that ask you to connect your bank account or supply financial data. Watch tutorials to make sure you understand how to use the service. Read reviews, check Better Business Bureau ratings and find out if financial journalists you trust have firsthand experience using the platforms.

You may also want to investigate how financial apps plan to use your data. It’s a good idea to visit an app’s FAQ section to see if it addresses data privacy, as well as any questions regarding how they make money and integrate with third parties. Many fintechs partner with traditional institutions to ensure users’ money is safe—but some operate solo, so it’s also important to ensure any funds you deposit will be federally insured.

Popular Apps and Platforms

Depending on your goals, there are platforms for gamifying everything from financial literacy to building a honeymoon fund or paying off student loans.

On some apps, game-like elements are relatively subtle. Digit’s prize-based model, for instance, motivates users to siphon money into their savings and keep it there—but it’s not really a “game” in the traditional sense. Qapital also lets users create savings buckets for different goals but takes its gamification features a step further with “Money Missions,” challenges created by behavioral economists to encourage users to optimize their spending.

Acorns, which uses a “round-up” model to invest users’ spare change, applies similar principles of gamification as Digit to help beginner investors learn the basics of building wealth. It triggers reward-seeking centers of the brain by helping users visualize how small, consistent contributions can lead up to significant sums over time.

Other apps are more clear-cut crossroads of gaming meets finance. Commonwealth, a nonprofit that helps financially vulnerable people build security, piloted SavingsQuest in 2015. The award-winning game, available on mobile app and online, lets users earn badges and complete challenges by meeting saving goals. Three months after launch, Commonwealth found that SavingsQuest users saved 25% more on average than other cardholders.

Long Game is another example of an overtly gamified financial experience. Users open a free, FDIC-insured savings account with Blue Ridge Bank in order to gain access to a series of mini games. Some are casino- or lottery-style, like scratch-off games and slots, while others are more elaborate “savings missions.” The more you save, the more games and rewards you unlock.

Nestlings, an app currently in beta mode, is yet another platform that aims to make saving fun. The app, created by the UK-based fintech company Thought Machine, features cute, cartoon-like avatars that perform various actions based upon users’ real-world spending habits. Fortune City is a similar “virtual world” app that lets users build a simulated city by recording their expenses and making smart financial moves.

There are even apps that help you save with a partner or other members of your household. Twine, for instance, is designed for couples working toward a shared goal, and allows for progress-tracking with a side of accountability. For families who want to add a spirit of friendly competition to financial literacy lessons, Goalsetter lets parents pay kids’ allowances based on correct answers to trivia questions about finance-focused concepts like interest rates.

How to Use Gamification to Meet Financial Goals

Different gamification methods and platforms work for different people. Here are a few of the most common tactics, and how you might apply them to your own savings or investment goals:

  • Challenge yourself. If you’re not ultra competitive but consider yourself “outcomes oriented,” consider using an app like Acorns or Qapital to set goals and watch your savings grow.
  • Compete against others. If you’re competitive by nature, an app that lets you track progress alongside friends and family like Twine or employs a PLB model may help you spend smarter.
  • Seek out cash rewards. If you’re most motivated by cold, hard cash, an app like Digit or a bank program that hands out bonuses just for keeping funds in your account may be a way to make your money work for you.
  • Build virtual worlds. If you’re the type who has spent countless hours tinkering in games like SimCity or Roblox, apps like Nestlings and Fortune City may entice you to make smart financial moves in order to advance your virtual characters’ storylines.

Gamification can put a unique spin on personal finances—an area many people consider dry or difficult to comprehend. For those seeking a way to level up their financial habits, adding a fun twist to traditional spending or saving may be worth exploring.

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