It's the first week of school at Aquinas High in New York's South Bronx. Floors are polished to a glossy sheen, white blouses and gray skirts are freshly pressed, and students in Ann Murray's G period economics class are encountering for the first time this thing called the stock market. Sure, they've heard of it. But stocks, bonds, and dividends remain largely alien concepts. "I only know what I see on CNN--where [traders are] throwing papers at each other," says Kariba Lang, 16.
That knowledge barrier is about to fall. Murray will soon have her students at this Catholic all-girls school reading stock tables like pros. They'll also be trading shares using real money. This is the sixth year Murray has imbued kids with the ways of Wall Street. Along the way, her pupils have run up a record that should be the envy of more seasoned investors (table, page 230). Indeed, Murray is one of a growing number of teachers exposing young people to stock market simulations or showing them how to read corporate financial statements. The goal: making them better investors and students of the economy.
Why now? "The impact of the market we're in is that lots more people are interested in investing and saving," says Richard Brueckner, chief executive of the Securities Industry Foundation for Economic Education, which sponsors a popular teaching tool called The Stock Market Game. The game allows teams of students in grades 4 to 12 to invest an imaginary $100,000 in actual stocks and compete to build a winning portfolio. Some 25,000 schools participate in the 10-week simulation, which is now on the Internet (www.smgww.org).
The Stock Market Game is hardly the only index of growing interest in teen financial education. Jeffery Fox, director of youth education for the National Association of Investors, says a push from teacher-members helped prompt his organization to pioneer a home-study course for kids called "Investing for Life." Even Wall Street's traditional institutions are focusing on youth education. Salomon Smith Barney introduced Take Your Parents to School Day in February, featuring a special finance curriculum. Merrill Lynch declared April International Saving Month to encourage savings among kids. And the New York Stock Exchange reports increased participation in its annual teacher workshops.
SIXFOLD JUMP. Yet for all these efforts, only a few add real cash to the mix. In a depressed area of North Philadelphia, teacher David Kaplan set up the Program for Economic Development at Julia de Burgos Bilingual Middle Magnet School and William Penn High School. Kids work in concessions selling food and school-logo items in return for stock. At the end of the semester, they share in the profits.
Murray's investment club in the Bronx began after she had been using a simulation for the stock market, then one day mused: "Wouldn't it be great to really do it?" Thus was born the Aquinas Eco stock portfolio and investment fund.
Murray started by persuading a vice-president she knew at PaineWebber to get the firm to manage the students' portfolio. She raised the $500 minimum by getting 150 girls and faculty members to kick in $1 each, and a donor to add $360. The brokerage agreed to waive its commission and charge only the Securities & Exchange Commission minimum--then $3.80 a trade, now $4.50.
Then she set up the Aquinas Eco fund. At the beginning of each semester, students pay around $1 per share to buy into the fund, whose results mirror the performance of the stock portfolio. When the semester ends, students cash out their shares--at what they hope will be an increased value. Murray doesn't withdraw any money from the stock portfolio. Instead, she pays the students out of a cash box that contains proceeds from the original share sale. Any shortfalls come out of her own pocket.
And boy, have the stocks jumped. The portfolio's value was recently $3,361, a sixfold increase over five years. Says PaineWebber broker Craig Biszick, who helps the class: "The stocks the kids selected, had anyone invested big money with them, would have made a fortune."
The portfolio has had some ups and downs, however, and the fund's shares have ranged from 93 cents to $1.86 apiece. Recently, they were worth $1.13. Each time they have approached $2, the "stockholders" have voted a split to keep shares affordable. Students are required to own at least one share, but a few have bought as many as 40. If someone can't afford the cost of entry, Murray advances the cash and lets the student work off the "loan" by doing odd jobs around the classroom.
Since Aquinas Eco shares rise or fall depending on the portfolio's results, students feel the impact of their decisions about which stocks to buy and sell. In November, 1998, after a spirited debate, they bypassed Dell Computer at 30 13/32 in favor of Compaq Computer at 34 1/2. Today, Dell is trading at 48 7/8, while Compaq is around 23. They felt much happier about their move to buy one share of America Online that same month at 93 3/4. Shortly after, the stock split, and now it's back up around 89. Other winners have been Microsoft, Intel, and Merck, while losers have included Toys `R' Us and Kmart. The best student move, Murray says, was the decision to reinvest their Microsoft gains in other stocks.
Murray says the investing exercise helps students understand the importance of long-term goals. "What students used to do was go to a check-cashing store and spend an enormous amount to cash their paychecks, then put the money in an envelope or a shoebox." Pay also disappeared into clothes and CDs. Now, many save in a bank account. Paula Washington, 17, a sophomore at City University of New York, chose to keep her 30 Aquinas Eco shares after graduating. She says she wants to stay connected to Murray until she turns 18 and can "do the real thing" via a broker with money she has saved from typing student papers. Then, if she says she's making an educated guess about a stock, you'd better believe her.