How Stocks Teach Kids About Money and Math
An important key to teaching kids about money would seem to be an early introduction to the stock market. And there's a bonus if your kid puts in the time: young students who are exposed to the stock market end up learning more basic math than most.
I'm not talking about a marginal gain; the difference is substantial. Kids in grades four through six who were exposed to a stock market game at school, on average, scored higher than 68% of their peer group in the understanding of financial concepts. Kids who did not play a stock market game, on average, beat just 42% of their peers.
Meanwhile, kids in grades four through six who were exposed to a stock market game, on average, scored higher than 55% of their peer group in basic math testing. Kids who did not play a stock market game, on average, beat just 43% of their peer group. Both in financial literacy tests and in math tests, results for kids in grades seven through 10 echoed this pattern.
These findings, released last year by Learning Point Associates, will no doubt help embed the granddaddy of school-based personal finance curricula in some schools -- that being SIFMA Foundation's Stock Market Game, which has been around since 1977 and which some 12 million students have played. There are some interesting sidelights to the Learning Point study:
· Teaching technique doesn't matter Regardless of which teacher or what techniques are used in the classroom; student math and financial literacy scores rise when kids play the Stock Market Game. That's huge because few teachers have any interest in finance and most do not feel qualified to head such a class.
· Teachers get taught Teachers who agreed to lead a class in the Stock Market Game reported becoming more financially savvy themselves; they began to do things like set financial goals, analyze their own risk tolerance, read the business section and watch money-oriented TV stations like CNBC. This too is hugely important because we need more teachers with the skill set to lead personal finance courses.
The shame is that so few students get exposed to the stock market before graduating from high school. You can raise awareness of the market at home by talking to your kids about the companies (and the stocks) behind the products they love -- Disney, McDonald's, Apple, Game Stop, Electronic Arts. But the real gains in math and money skills seem to come when your kids get into the weeds with an actual or play portfolio and (in a team) discuss the impact of taxes and commissions, set asset allocation and compute annualized returns. Sounds a lot like real life, I know. I guess that's why it works.
If you have a question about kids and money, I'll get the answer. Email me at dankadlec@dankadlec.com.
Photo courtesy Flickr user sjsharktank