Finding Opportunity in the Recession: Financial Literacy a Potential Mine for Start-Ups

Every wannabe entrepreneur wants to know: What businesses are recessionproof? Perhaps if you're asking the question, you're already too late. For first-time entrepreneur Reggie Gore, finding a recessionproof business idea wasn't a conscious decision.

The 29-year-old graduate of Georgetown University's McDonough School of Business has a day job working in a management training program in San Francisco. But he hasn't forgotten his two main passions: economics and working with kids (he coached Little League basketball for a few years after college). Gore thought about combining these interests into a side business. The problem with the way kids learn economics today, as Gore sees it, is that it has not been made relevant to their lives. To Gore, the answer was a Web-based computer game that would allow players to explore a virtual world that would teach them personal-finance skills.

[See 5 Reasons to Start a Business in a Recession.]

It was early 2008 when Gore started thinking about the project. The economy had been slowing for a while, but the terms subprime mortgage and credit default swap were still far from the public consciousness. Just a few months later—and a few months into Gore's work on the concept of his game—the lack of financial literacy education in America was suddenly dominating the news.

[See 5 Questions to Test Your Financial IQ.]

In June, the Organization for Economic Cooperation and Development reported that "while the lack of consumer education cannot be identified as the main cause of the crisis, it is widely agreed that it played a major role in aggravating its effects." That shortfall in financial knowledge among Americans goes beyond the economic meltdown. According to the 2007 Survey of Consumer Finances, about 8 percent of U.S. households don't have a checking account. That might not sound like much, but it equates to nearly 9 million families. Knowledge is especially lacking among youth: A recent study from the Pension Research Council found that fewer than a third of young adults have basic knowledge of interest rates, inflation, and risk diversification.

The economic downturn spurred action in Washington on the financial literacy front. Last year, Congress passed a resolution declaring April "Financial Literacy Month." Suddenly, Gore's idea for a game to teach kids finance skills became highly topical. "I didn't plan it this way," he says. But the larger events quickly gave his project a new impetus, and he formed a company, Nexlutions, to design and market the game.

Donta Wilson, the regional president of a bank and an acquaintance of Gore's, noticed the buzz building about financial literacy education but worried that the excitement wouldn't last. "When I saw legislation and encouragement from the government, I saw that this snowball was running pretty quick," he says. Wilson told Gore last year to take action before financial literacy loses steam as a hot topic. "We have a window in the next 10 months. Right now, people are hurting and still worried about [financial literacy education]," Wilson says. Four months ago, he joined Nexlutions and worked to secure funding.

Others see personal-finance education as a lucrative business opportunity. The start-up HelloWallet, founded by former Brookings Institution scholar Matt Fellowes, has an online tool in the works that doles out financial advice. At a conference in September, Bill Clinton named the company a top innovator. Another start-up, EverFi, designed a multimedia financial literacy program it's pitching to higher education institutions and community organizations.

Wilson isn't worried, however, that the market will grow saturated. He hopes his still-untitled game (the working title is Ultimate Wealth) will stand out from the crowd in several ways when it launches in a few months. First, Gore says it was important that the game touch upon every aspect of personal finance. He found a way to bring together a number of topics—such as credit cards, stock, and mortgages—by devising a story line that puts the player on a journey throughout various cities where he or she must complete different scenarios. For example, players might be presented with a limited budget from which they must decide if they can go to a concert on Friday night or stay in and study for a test. The goal is to present real-life scenarios. "The best way to learn is through experience, and that's what the game does," says Kaaryn Walker, Gore's cousin and the other member of the Nexlutions team.