But should they? Or are there smarter ways of teaching the young about markets, business, profits and economics?
The focus on stocks springs from zippy Internet games, used by some 750,000 students last year, mostly in the upper grades. Kids love them. They organize teams, get a virtual $100,000 to invest, then trade stocks as if they were baseball cards. At the end of 10 weeks, the team with the biggest profit wins, usually T shirts or small cash prizes from local sponsors. The most popular programs: the Stock Market Game, from the Securities Industry Association, a trade group for brokerage firms and investment banks; and the Stock Market Simulation, from Stock-Trak, a company in Duluth, Ga.
The kids are daytrading, of course–whisking in and out of stocks. It’s the only possible choice in a short, exuberant game. Along the way, teachers use textbooks or downloaded lesson plans to explain how the stock market works and its place in the economy. Some schools offer stand-alone finance and econ courses; others embed the material in history or social-studies classes. The games also turn up in math classes, to help teach percentages, decimals and fractions. “The play gets the hook in,” says Bob Duvall, head of the National Council on Economic Education. “Then can come the important concepts.”
Ah, the concepts. There’s the rub. The economics lessons look great. The better that students learn how to use economic reasoning, the sharper voters and savers they’ll be.
When it comes to investing, however, the teaching takes a wrong turn. I’ve looked at the textbooks and lesson plans and found little or no discussion of mutual funds, diversification, asset allocation or holding for the long term. Instead, they glamorize stocks, stocks, stocks–going so far as to explain short selling and margin buying to 16-year-olds. What’s the point, when the first investment young workers will face is a choice of funds in a 401(k)? “The games get kids interested,” says John Morton, vice president of curriculum development for the NCEE, “but then they teach them the wrong things.”
When Morton taught classes, he says, he always had students create a dartboard portfolio–picking stocks by throwing darts at the newspaper listings. One year it beat the stockpickers for the state championship. (For himself, Morton buys index mutual funds.) Fred Floss, a professor at Buffalo State College in New York and co-director of the Buffalo Center on Economic Education, tells kids that to win in 10 weeks they’ll have to “do the opposite of what’s good investing in real life.” (Floss buys index funds, too–is there a message here?)
Viewed through an academic eye, stock-market games expose kids to a critical part of the economy that their parents may not know much about, says Jim Charkins, head of the California Council on Economic Education, “but you don’t want to give kids a false impression of investing.”
Getting the story right depends on the teachers who choose the materials the class will see. It also depends on state councils and centers for economic education that help train the teachers and write the lessons they’ll probably use.
Both the schools and the centers seem to be taking the daytrading critique to heart. The NCEE is rewriting its basic textbook to add, for the first time, a section on mutual funds and diversification. The Florida Council on Economic Education wrote a basic financial-planning guide for both students and parents. In Idaho, one of just seven states to require high-schoolers to study some personal finance, the council is preparing a test to assess how well basic principles are being taught. Even the SIA’s manual and Web site will add mutual funds this spring, although not as a core investment. “You can say what a mutual fund is, but there’s not much more to be learned,” says Don Kittell, the SIA’s executive vice president. (I can think of a few things, but let that pass.)
John Morton’s dream teaching tool would be a mutual-fund game, where kids create portfolios for a certain objective, such as income, security or growth. They’d win if their plan succeeded over various historical periods. Memo to the Investment Company Institute, the mutual-fund trade association: These kids are your next customers. Why are you ceding their hearts to sellers of stocks?
Still, it’s nice to see some nod to finance and economics in the schools. Most school boards don’t consider it a priority, says Dara Dugay of the JumpStart Coalition, which promotes financial literacy. They figure that kids can learn about money at home. Memo to parents: for lesson plans, try the clearinghouse at jumpstart.org or aaii.com. You may learn something, too.
