Imagine you put $100 in a savings account with an interest rate of 2% per year. After 5 years, how much would you have in the account if you left the money to grow? Would it be $102? Less than that? More? 

Researchers posed this question in 2014, and only 67% of American households chose the correct answer. 

Though financial literacy has greatly improved amongst American households in the 10 years since, a general trend of flawed financial behaviors still exists today. These behaviors, which range from undersaving to irresponsible borrowing to poor management of personal assets, show an overall lack of monetary foresight. This gap in foresight was evidenced by the mere 4% of annual disposable income that American households saved between 2007-2012, a number that dipped to as low as 2% at times (for comparison, German and Swiss households during this same period saved 14% of their disposable income), alongside the common failure of employees to invest in company-sponsored retirement plans matching employee contributions into stocks.

A study conducted in 2011 investigated these patterns of short-sighted decision-making by bridging the perceived distance between a person’s present and future self. Aiming to overcome the psychological phenomenon of future self-discontinuity, which makes far-future decisions like saving money seem like decisions made for a stranger rather than the self, researchers had participants interact with age-progressed versions of themselves in what was essentially a virtual reality mirror and observed whether they would be more motivated to save money for the future afterward. Shockingly, participants who interacted with their future selves allotted more than twice as much money to their imaginary retirement account. These groundbreaking results presented a potential new method for encouraging financial responsibility.

In the years since this study was published, rapid advancements in neuroscience and financial decision-making have only built upon the viability of a VR-based financial education tool. Age Wave, a think tank that specializes in issues related to aging, ran its pilot study with the concept in 2016 and obtained positive results, with the tool seemingly under further research. Broader investigations involving VR and cognition have confirmed the capability of age-progressed simulations in strengthening self-continuity between our present and future selves. The potential for further personalization of these simulated interactions also seems exciting. Improved realism and immersion of VR technology over the years will certainly increase the believability of user-interface interactions. Additionally, new research establishing the importance of personality trait alignment in meeting long-term savings goals, combined with our highly capable generative AI, could allow the software to become truly interactive and highly tailored to each individual’s needs, making the VR tool even more effective.

Despite its promise, the age-progressed VR simulation therapy discussed above does not exist today. However, the resources needed to build it and the information required to achieve financial literacy have become more accessible than ever. In an economy where the wealth gap seems to widen daily, maybe all it really takes to bring financial literacy to the world are some goggles and you.