The Ultimate Guide to Teaching Finances

In Mike Hyman's math class, fifth-grade students spend five weeks each semester buying and selling stocks. With $100,000 to burn, they research which companies show the most potential for growth and fill up their portfolios.

Once the math scholars from Carroll Elementary School in Indiana stop trading stocks, they let their money work for them. But that doesn’t mean they forget about it.

“They’ll be checking the computer, and they’ll walk around the room then to the other members of their team, and they’ll say, ‘Microsoft went up 25 cents,’ and they’ll whisper so nobody else in the room knows what they’re invested in,” Hyman said. “They’re talking financial stuff as 10-year-olds, and it’s just neat to hear them talk like that.”

While the money may not be real, the lessons that these kids learn during the Stock Market Game apply to the real world. The game, created by the SIFMA Foundation, gives teams of fourth- through 12th-graders a hypothetical $100,000 to invest in authentic stocks, bonds and mutual funds.

Through activities such as the online Stock Market Game, educators, parents and industry professionals are helping students build a solid fiscal foundation.

“It’s critical that people of all ages have access to financial education so that they can lead financially independent and successful lives, and ultimately help our communities grow and prosper," said Melanie Mortimer, executive director of the SIFMA Foundation for Investor Education.“

That financial education includes interactive lessons, educational games and real life application.

Plan interactive lessons

Learning about finances allows people to lead a more productive life, said Don Zabelin, who teaches consumer education, business law, investments and keyboarding at West Chicago Community High School.

“If you have a handle on your finances, you have an opportunity to build wealth in the future, which will give you a lot more flexibility, a lot more choices for what you want to do,” Zabelin said. “It’ll also head off the possibility of having financial problems like we hear about all the time.”

To teach his students how to handle their finances, he takes them to the computer lab. For a budget project, they research the cost of owning a car.

“It’s exciting to shop for a car and then shop for financing terms and then shop for insurance for the car,” Zabelin said. “And you can do all these things right there in the classroom, which were not opportunities we had a few years back.”

On the Illinois Treasurer's Office website, his students search for abandoned property. After a certain number of years, banks turn unclaimed property over to the state, including savings accounts that the owners forgot about. Literally half the class finds relatives who have lost money, and occasionally, students find money they've lost.

His students also compete in contests including the Illinois Personal Finance Challenge, the Stock Market Game and the LifeSmarts Ultimate Consumer Challenge. Last year, his students won six state championships in the various competitions they entered.

Play games

The Stock Market Game allows students to learn technology skills while they're learning about finances, Mortimer said.

“Incorporating technology in the learning process not only makes it exciting for kids, but it also helps to continue to bridge the digital divide,” Mortimer said.

The stock market is really not that hard to understand, said Hyman, the teacher at Indiana's Carroll Elementary School. Once his students learn about it through the game, they won't be scared when they actually invest real money.

“It seems like something that only adults can understand,” Hyman said, “but actually, the kids pick up on it pretty easily.”

When Jason Lee was in sixth grade at Casey Middle School in Amherst, N.Y., he won first place in the national InvestWrite competition, which is produced by the Stock Market Game. Through the game, he learned the importance of diversifying the stocks in his portfolio so that he would spread the risk over a number of companies. To illustrate the principle in his essay, he used an analogy from his favorite sport: baseball.

“You can’t invest all in one pitcher,” Jason said, “because if he gets injured or something, you will lose the World Series.”

Jason's group invested in companies including Target and General Motors. He thought they were good stocks to invest in, but they didn't make his team a profit. Instead, the stocks dropped about $7,000 during the competition.

The game provided a great learning experience for Jason, said his mom, Christine Lee.

“I thought it was wonderful because Jason would come home complaining, ‘Oh my stocks went down again’ and this and that,” Lee recalled. “I said to him, ‘Think about it, some people are losing their money, their retirement funds, some people have to go back to work. Here your money is virtual, it really doesn’t matter, but could you imagine these poor people who have lost a lot of their investments?’ So I think he could appreciate it more that way.”

Tie finances to other subjects

Aside from teaching kids about global markets and investing, the Stock Market game meets curriculum standards in math, economics, social studies and English. And by playing the game, students have actually improved their math scores.

In seventh grade, Emma Boxall raised her math scores by about 15 points. During Business Education class at La Mesa Junior High School in Santa Clarita, Calif., she learned more about decimals and percentages and enjoyed adding up how much her stocks would be worth. 

“I pretty much liked seeing what stocks there were and who had stocks, like what companies did,” Emma said.

Seven years ago, her teacher, Jeffrey Aronsky, brought the game in his school district. Now, he coordinates the game in Los Angeles County. Since the school started using the game, La Mesa Junior High's Academic Performance Index scores in math have risen because students actually apply what they're learning.

“As a business ed teacher, I teach the kids real life and what life is all about,” Aronsky said. “Teaching them basic algebra and not giving them practical application has no meaning.”

While they're playing a game, the students are reinforcing math and writing skills. They request an annual report on the stock they bought by writing business letters to the company. Once they receive the report, they figure out how to read it and also write a report on the company.

He starts teaching his class by showing them how the products they use relate to the stock market.

“I bring it to their level,” Aronsky said. “I say, ‘When you go to a mall, what do you buy?’”

The first thing they usually say is clothes, so he asks them how they think the merchandise got into a store such as Hot Topic. That leads them into a discussion of where the company found the money to open and why it's successful.

Seniors in high school tell Aronsky "thank you" for getting them started in the stock market, and over the past few years, many of his students' parents have opened up stock market accounts for their kids as Christmas presents.

Teach by example

At home with their parents, children receive their first lessons in personal finance. In Illinois, Catherine Barron reads books to her young girls including "Rock, Brock, and the Savings Shock," and "Isabel's Car Wash," which Federal Deposit Insurance Corporation chairman Sheila Bair wrote. They also learn how to count money by playing cash register and learn how much food costs by going to the grocery store.

“The most important thing they get at home is they see how we behave,” Barron said. “When something breaks, we fix it. If we can borrow something instead of buying it, we do. We make do with what we have rather than always going out and buying something new.”

Barron studied finance and economics in college and business school, but the only place she really learned about finances was at home. Now, her father, husband and brother run The Planning Group Inc., a financial planning and advisory firm in Northfield, Ill.

In schools, students should learn about basic budgeting and the repurcussions of using a credit card inappropriately or improperly, she said. But at home, parents need to take responsibility for raising responsible, financially literate children. The example they set says more than anything they tell their kids verbally.

Even if the parents think they can't teach their kids about finances, "they already are and they have been for years,” Barron said. “They may not be teaching them the right things or good things, but they’re surely teaching them.”

But many parents fear that if they talk about personal finances with their kids, they will have to share their income, and they don't always want them to know that information, said Lisa Dworkin, the president of Money Masters Foundation, a nonprofit organization dedicated to teaching financial literacy skills.

“It would be wonderful if kids were learning about it at home,” Dworkin said, “but you have a lot of parents who aren’t comfortable teaching about finances.”

That's why schools need to teach finances too, she said, including banking, credit, stock market investments, bonds and mutual funds.

Call in financial experts

To teach kids about finances, many schools are bringing in reinforcements. When financial organizer Jameel Webb-Davis talks to students about personal finances, she plans interactive exercises that resemble real life.

“Whatever activity you do, you have to get them doing something,” said Webb-Davis, who runs StartMoneySmart Inc.

You also have to teach them in a way that's interesting or that they can relate to, said Michael Brown, Barron's brother and a financial analyst and certified public accountant with The Planning Group Inc.

If you try to teach a high school student about stocks, they'll think their parents should be interested in it. But when you teach about products that they know such as the iPhone in their pocket, you show them how that product relates to Apple, which is a public company.

“Finance is no different than any other topic: If you can’t find some way for people to relate to it, they’re not going to learn about it,” Brown said, “and they’re not going to want to learn about it.”

He speaks to college classes as well as groups of retirement plan participants, including a range of employees from doctors down to factory workers. He's amazed at how many people put thousands of dollars into a retirement plan each month, but don't know what they're putting it into. Many people also don't know the difference between a stock and a bond. (In case you don't know either, a stock shows that you own a portion of a corporation, while a bond means you are lending your money to an institution, which promises to pay you back with interest by a certain date.)

“The reason that a lot of people don’t learn more about this kind of stuff is they assume that it’s too complex when the majority of what people need to know doesn’t involve any complex math, it doesn’t involve knowing the tax code, it doesn’t involve anything that’s extremely difficult,” Brown said. “You just have to have an interest in it or at least force yourself to do a little work. It’s amazing the difference that a little bit of education will make.”

Connect finances to real life

Back in Hyman’s room at Carroll Elementary, fifth-grade math students solve complicated division and multiplication problems as they figure out how to invest their money during the 10-week Stock Market Game. Every semester, Hyman splits the kids into teams of four or five students and picks one of them per team to be the CEO.

Hyman explains that their investment strategy would be different than the one their parents would use for a 20 or 30 year period. His 95 students look for stocks that are close to or at their 52-week low because their value could rise quickly and earn them a large profit.

Teams from Carroll Elementary have won the state Stock Market Game competition for six of the last seven years. But more importantly, they learn financial knowledge that they can apply throughout their lives.

“It’s real life,” Hyman said. “It’s something that they need to know about so that when they get old enough to invest their own money, they’re more aware of how to do it and what’s going on.”