Stock market games and apps that gamify trading leverage the allure of getting rich quick by beating the market. A recent column in the Wall Street Journal by Jason Zweig, “What Teenagers Really Learn From Stock-Market Games,” highlights what happens when students are encouraged to take unnecessary risks and trade excessively. He compares motivating this type of behavior to making driver’s education more exciting by “by teaching kids to run red lights and crash into brick walls.”

Research around retirement investing supports the comparison between the risks of encouraging reckless driving and those of a gamified approach to retirement investing. Over a decade ago, the OECD identified the rapidly increasing need for individuals to save for their own retirement as a growing risk to long-term financial well-being (OECD, 2008). Coinciding research on retirement savings supports the pressing need for students to learn how to make sound investment decisions. Furthermore, research shows, on average, investors who use a passive investment strategy and purchase index funds have better returns than those who use an active investment strategy (Barber and Odean, 2000). It is vital for financial education curricula to be built on this strong research base and thereby encourage a sound approach to investing rather than exploiting the thrill of trading stocks, which is, in many ways, gambling.

Games can be used as a helpful learning tool, but what’s fundamentally wrong with these games is that they aren’t based on research. Instead, what we’re seeing is programs teaching the gamification of investing. Almost all of the current investing games in the financial education space glorify investing as a quick, fast-paced, “easy-wins” game. This notion is simply false and implies that there is a strategy to winning—you just need to know the rules and the cheat codes. The message is that there is a way to game the system. Fortunately, there is a way to reduce risk and make likely gains in investing, but it's not by treating investing like a game. According to Zweig, “In the long run, investors who diversify broadly, avoid unnecessary risk and rarely trade are almost certain to do well. In these stock-market competitions, teenagers who behave like that are almost certain to lose.”

At UCFEI, we recently took on the task of developing a game with learning goals aligned with our research-based philosophy on investing. We created a game that not only helps students understand that using a passive investing strategy almost always yields higher returns in the long term for investors, and that using passive investing to reduce investment risk helps investors meet long-term financial goals, but also allows students to actually experience likely outcomes of passive versus active investing strategies.

Our field test produced interesting results. Some students found the game’s emphasis on passive investing “frustrating” or “boring” because their risk-taking didn’t often pay off. Kids were disappointed that there was no adrenaline rush or digital confetti. To be honest, we weren’t surprised by those comments given the priority placed in other investing games on the excitement of intense active trading. Yet, field-test feedback reflected that an overwhelming majority of students walked away with an understanding crucial to their own long-term financial well-being: passive investing helps investors meet their retirement goals.

Financial education games should provide students with the opportunity to construct their own understanding of complex concepts, such as the likely risks and rewards of using an active versus passive investment strategy, including that passive investing can reduce investment risk, facilitating the realization of long-term financial goals.

The impact of building such a key understanding is clearly far more valuable than the fleeting thrill of simulating beating a virtual market and being showered in digital confetti. As Zweig states, “That’s [putting safety first is] what children learning how to invest should be rewarded for. They shouldn’t be proclaimed ‘winners’ for taking huge risks that could encourage a lifetime of bad behavior.”

We hear arguments all the time that investing games and investing as a whole are the hook that draws students into a financial education class. If you need a hook that glorifies gambling, you're not doing it right.