School Your Children on the Stock Market

Physician's Money DigestJune15 2004
Volume 11
Issue 11

When it comes to personal finance and investing, last year some 750,000 students across the country in grades four to 12 were learning through investment portfolio simulation programs. And in many cases, their teachers and parents were learning right along with them.

Big Money Games

In the games, children are organized into teams, with each team given a hypothetical $100,000 to invest. Teachers incorporate the program's supporting materials into their curriculum, helping students learn basic academic skills such as math, language arts, social studies, and history. For example, the teaching guide provides students with concrete connections between math lessons and managing their portfolios. At the end of the semester, the team with the largest profit wins.

Investment games such as these have been around since 1977. Two of the most popular ones are the Stock Market Game (SMG;, from the Securities Industry Association, and the Stock Market Simulation (SMG;, from Stock-Trak in Duluth, Ga.

Teachers who have incorporated the programs into their curriculum give them positive reviews. Jane Snyder, a middle school teacher in Illinois, says the SMG has helped familiarize her seventh and eighth grade students with the American economic system, and then some. "The SMG helps them to develop proficiencies that become lifelong," Snyder explains. "Problem solving, risk assessment, cooperation, and teamwork are all skills that are very important to learn."

Stock-Trak's product is similar. Students receive a brokerage account with an imaginary cash balance of between $100,000 and $500,000, 24-hour access to their account via the company's Web page, a toll-free telephone number for customer service, and periodic statements of their portfolio's activity, value, and ranking compared to classmates. Student participants are able to buy, sell, buy on margin, and sell short most common stocks, stock options, and mutual funds.

Narrow Focus


However, critics of the programs question exactly what it is that the students are learning. John Morton, vice president of curriculum development for the National Council on Economic Education (NCEE;, states in a article, "The games get kids interested, but then they teach them the wrong things."


The wrong things, according to the article, are a focus on stocks and the art of selling short, rather than an education in mutual funds, diversification, asset allocation, and investing for the long term. On one hand, the Internet-based investment games provide some solid economic lessons and expose youngsters to a part of the economy that they might not otherwise experience. The problem is that winning a 10-week game by zipping in and out of stocks can give kids a false impression of investing. In effect, kids are learning to do the opposite of what are considered good investment principles in real life.


The key elements, the article notes, are the teachers who choose the materials the students use, state councils, and centers for economic education that help train teachers and write the lessons they're likely to use. To that end, both schools and centers are making some changes. The NCEE, for example, is rewriting its basic textbook to include a section on mutual funds and diversification. And the Securities Industry Association, which markets SMG, is adding previously omitted mutual funds to its manual and Web site.

NCEE's Morton notes that the ideal teaching tool would be a mutual fund game. In it, kids would create portfolios with a specific objective, such as income, security, or growth. In order to win, their strategy would need to succeed over various historical market periods, not a mere 10 weeks.

For children, parents, and teachers alike, learning about markets, business, profits, and economics makes good sense. So does learning to be a prudent investor with a focus on long-term goals. One day, that $100,000 account from SMG will be real money, and much more painful to lose.

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