“Gamification” was coined by British programmer Nick Pelling, but like many British innovations it has been most hotly embraced by cutting-edge US tech firms to motivate employees and encourage customer loyalty via social media. It is also making waves in the US pensions world and in the 401(k) arena, where the application of game-like techniques are motivating employees to save more.
At RedSTART, a financial education initiative for young people, we are already seeing gamification in action. When running sessions with younger students, the day is focused around setting challenges in which the pupils get the opportunity to make investments in different areas, trying to be the one to make the most money by the end of the day. As the day progresses we give them a helping hand, explaining how risk, reward, and compound interest are at work within the challenges. Those who take the most advantage of these factors are those who will have saved the most by the end of the day.
To see the future of gamification in savings, the best place to look is at more tech-savvy young people. We have already seen it in action in our recent “Classroom to Boardroom” session in conjunction with charity, Entrepeneurs in Action – an initiative that aims to inspire young people to be more entrepreneurial & employable. A group of older, “millennial” students were set the task of creating an idea for how to engage more young people with savings. 72 hours of designing, planning and preparing culminated in a presentation to a group of board members. The pupils, from Hampton and Surbiton schools, came up with a compelling business case to develop a smartphone app that would encourage saving through educational games and social media. Fronted by a “Pensions Panda”, they proposed that saving could be rewarded with “Nectar-style” points which could be redeemed over time for things such as concert tickets, discounts in stores, or donations to charity.
Gamification, like this, is one of the most effective ways to make otherwise complex material interactive and engaging. One only has to look at how it has taken off in other areas of life to see its effect – one of the best examples being personal fitness. FitBits, Jawbones, fitness app Strava and many other personal activity monitoring devices offer individuals the chance to see how many steps they’ve walked, how far they’ve cycled, how many calories they’ve burned on a daily basis, competing with their friends and challenging themselves. It becomes an almost an irresistible challenge to try to walk just that one step further than the day before. It also underlines a fundamental principal – setting goals and realistic incremental objectives can help one achieve previously thought unsurmountable challenges. This applies to something simple like depositing in to a bank account to complex savings vehicles, such as a DC schemes – the common ingredient for success is sticking to a plan.
The focus on interaction and engagement cannot remain in the classroom. At Redington we are keenly aware of the need to engage young people with retirement savings. The recent ‘Age of Responsibility’ report, produced by Redington in conjunction with Lord Hutton, addresses this subject in detail, as does “The Generation Game” – a 2014 study by Oxford university students into young people’s attitudes to saving. The conclusions of both reports find that retirement saving falls too far down people’s priorities list. In the age of defined contribution pensions, where the onus is on the individual to save for their own retirement, this is a disaster waiting to happen.
The Age of Responsibility paper sums up the main problems in four words: retirement saving needs to be ‘Easy, Attractive, Social and Timely’. At the moment, it is not. And with the shift in responsibility towards the individual and the rise of defined contribution pensions, people need now, more than ever, to see how their pension plan is working: with their current investments – how much money will they have each year when they retire? How does that compare with what they earn now? How will changing their investments alter this? Will buying an annuity make them better off? As soon as people are able to visualise this, see their investments in action, projected into the future, and interact with them easily, then engagement with retirement savings will become much simpler, and will show people just what they have to do now to ensure that they have comfortable in the future. Visualisation ‘or gamification’ may be central to this.
To envisage the future of saving and investing we need to go back to the classroom. We need to listen to young people and get their perspective. How will they best engage and understand something that they have no experience of? If they’re not engaging with it, then it’s not being done correctly. And if it’s not being done correctly, it must be changed.
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