How Gaming Teaches You About Money

Risk vs. reward

Do you spend everything on a rare item now or wait for something better later? Do you go all-in on a risky boss fight for big loot? Those are also some considerations you may make before investing.

Oftentimes the investments that have the highest potential for earning have the highest risk attached to them. Depending on how comfortable you are with risk you may take the opportunity to earn some loot or take a more conservative route and save your resources.  

In survival games like Valheim, you may have spent hours grinding resources for the best armor and weapons. You could take on the next big boss but being eliminated potentially means losing all your inventory. How you play can easily translate to how you invest or how comfortable you are with risk. If you are the type of player who dives headfirst in each encounter with all your resources in your inventory, you may be more inclined to make riskier investments and vice versa.  

You can also mediate risk by taking the time to spread out your resources. Taking the time to grind a ton of Flametal in Valheim will allow you to make multiple copies of the best armor and weapons. In this instance you have mitigated risk by having a little security blanket or back up.  

This strategy when it comes to investing is called diversifying your portfolio. This mitigates risk by having a spread of investments with varying levels of risk.  Even more simplistic games like Mario Kart have risk and reward scenarios. Sure you can take that tricky shortcut to get ahead of other players but you may fall off the course and fall behind. Knowing how comfortable you are with risk will inform various financial decisions like investing or even buying your first home.

This strategy when it comes to investing is called diversifying your portfolio. This mitigates risk by having a spread of investments with varying levels of risk.  

Even more simplistic games like Mario Kart have risk and reward scenarios. Sure, you can take that tricky shortcut to get ahead of other players, but you may fall off the course and fall behind. Knowing how comfortable you are with risk will inform various financial decisions like investing or even buying your first home.

Long-term planning and delayed gratification

Games often reward patience. The players who wait, plan, and grind steadily usually outperform the impulsive ones. Grinding is often slow and tedious but when you get to the point where you can afford that endgame armor or get a specific mount you have been waiting to drop in World of Warcraft. ^{footnote 1 1} 

That skill translates to saving and investing IRL. Grinding for your long term goals, whether it is getting that build you want in game or getting the house you want in life often takes long time horizons and disciplined budgeting. 

One way to achieve those real life goals while setting money aside automatically, is BMO Savings Goals feature within the BMO Banking App. Set your goal, choose an amount and set up a continuous savings plan to schedule automatic transfers into your savings or investment to make your money grind for you. ^{footnote 2 2}

Market dynamics and value assessment

In-game economies often mirror or resemble real world economies. 

One of the best examples of an in-game market dynamic is the Turnip Market in Animal Crossing New Horizons. Every Sunday Daisy Mai shows up on your island and sells turnips, the buy price for Turnips 90 to 110 bells per turnip, however the lowest selling price for Turnips is 15 bells. Everyday until Saturday the price will fluctuate and it is up to you to decide the best time to sell.  

Now we don’t know what determines the price of a turnip on a regular basis. In real markets market fluctuation directly correlates with supply and demand. The game teaches us markets can be volatile but there are solutions and strategies to help reduce risk. 

A good example of supply and demand in game is the Market Board in Final Fantasy XIV. Players can use the market board to sell items and crafted gear to other players online. Simply going to the search result in the market board you can compare crafted gear that is not melded with Materia and armor that is pentamelded. The armor that is pentamelded will be at a significantly higher cost as the success rate of crafting armor with the last materia slot is low.

So the demand for the pentamelded armor is high and the supply is low driving the prices way up. Whereas material used for crafting is common in the market, the demand is still high but there is a higher supply than demand as you can easily farm crafting material so prices are low. You are getting a high dose of economic education while having fun, you can also apply the strategies you use in these markets in real life with some minor tweaks.

Turning game skills into real money wins

Gamers put a lot of thought, time, effort and research into developing these skills and understanding of different mechanics. You already have the skills and knowledge surrounding real world financial concepts and now it is time to implement them.  Both in-game and in-life practice makes perfect. Apply resource management skills and take a look at your monthly budget. Separate needs vs wants and allot your financial resources to your goals. If your goal is to defeat your own high interest debt, manage your resources to attack those more aggressively. If your goals are to save money for a vacation, allot your resources to open your cash flow and put money aside more often.  

Understanding in-game economies often takes a lot of research. Apply this research to real life markets to better understand investing. Gaming has given you the skills you need to level up your finances. You can find more ways to apply your gaming skills to make real life financial progress with BMO NXT LVL.