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How does gambling affect decision-making and finances?

24 August 2023 - by YMCA of Greater Toronto

Paying to open a loot box or a virtual card pack in a video game is a form of gambling. You risk something of value, in this case in-game currency, and don’t know what you’ll get in return.

Gambling can potentially cause harm to a person’s financial well-being and it is important for youth to understand when an activity becomes gambling so they can identify the risks involved and implement strategies to stay safe.

Becoming financially literate could help with making better-informed decisions. For example, making a budget can help with deciding how much money (or in-game currency) you are willing to spend.

Understanding in-game currency

graphic of gold coins and jewels

Many games have their own currency. While the currency may be fictional, it still has a relationship to a real dollar, similar to a currency exchange. Most times, it is difficult to understand the true cost behind these in-game currencies and keep track of expenses as there is not a 1:1 conversion rate between the in-game currency and real money.

“It’s important for youth to understand the concept of virtual currency versus hard cash. Sometimes they spend hundreds of dollars on a parent’s credit card in a video game without even realizing it,” says Katie Spears Croghan, Outreach Specialist with YMCA Youth Gambling Awareness Program (YGAP). “That’s why financial literacy is so important.”

There’s nothing wrong with spending money on in-app purchases or loot boxes/virtual card packs as long as that’s what the money is for and there is an understanding of the cost behind it, she says.

Wants, needs, and understanding the difference

Hand drawing blank Wants and Needs list with black marker on transparent glass board.

“Wants and needs are something we frequently discuss at YGAP,” says Spears Croghan. “Cell phones in today’s society are a way of connecting with family and friends, so that might be a need. But do we need the most expensive phone? Maybe not. That’s a want.”

Games, in-app purchases, and gambling are all “wants”. Spending money on entertainment is fine to do, however we must not do it at the expense of our financial security or put this before spending on needs and essentials first. Part of being financially literate is making informed choices about finances and understanding the limitations of our budget and what we can reasonably afford. “Needs” such as rent, transportation, groceries, or education should be met before the “wants” such as gambling or in-game purchases.

Limit-setting and establishing an entertainment budget

Person holding a piggybank

Creating a budget is an important part of financial literacy, especially when engaging in gambling activities that involve a financial risk. Being financially literate means being able to understand costs, the impacts of spending habits, and being able to critically think about wants and needs in order to make informed choices.

With younger kids, budgeting could mean an opportunity to earn and manage their own money, like an allowance. While it may be easy to overspend if a parent’s credit card is linked to a game or online account, prepaid options like a gift card with a set limit can help avoid going over budget. Encouraging kids to think carefully about their spending choices when they have a budget can help them determine if the item they want is necessary or not.

“It’s a form of entertainment, but they also need to understand that if they’re using a PS5 card or Google Play card, once they’ve spent the money on that card, it’s gone,” says Spears Croghan.

For older youth, that might mean not using borrowed money or taking out cash advances on a credit card or a loan service for activities such as gambling.

Harm-reduction tips to remember

At YGAP, we talk about the importance of tracking money spent on gambling, in-game items and having money limits on micro-transactions (purchasing virtual items for small amounts of money). It is important to understand that it is easier to spend when money is converted to digital currency (i.e. debit or credit card), points or in-game currency. When we pay using cash, we physically give something away. When we spend using digital currency or in-game currency, we avoid the feeling of physically giving something away. Research shows people are more likely to buy goods and services with virtual representation of money (i.e. in game currency, chips, player card) than with real money. One of the reasons gambling-related companies and game developers use representation of money might be that the convenience, the ease of payment (e.g. load and tap) and the reduced “pain of paying” can make people spend more.

Gambling and gaming becomes a problem when it impacts a person’s life in a negative way. Spending more time than intended and potentially continuing to play for extended periods of time could translate to forgetting responsibilities and family obligations. It is equally important to set time limits on gaming and gambling and allocate enough time for other activities and responsibilities.

Additional resources and support services

Feeling stressed or anxious when unable to participate in gaming/gambling activities or losing interest in other activities/hobbies because all you want to do is gamble or engage in gaming are signs of developing a problem with gambling/gaming. ConnectOntario, KidsHelpPhone and Good2Talk are examples of support services that can help you address gaming/gambling problems. You can also contact YGAP to book a free workshops/webinar on gambling, money and decion making offered for youth as well as adults, parents and professionals working with youth.


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