As a social studies teacher in a district with a lot of flexibility in my curriculum design and instruction, I often take the time to introduce students to personal finance concepts in addition to their regular economics standards. I love getting to introduce kids to investing.
Students are always getting lessons on supply and demand, scarcity and opportunity costs. We regularly discuss larger economic concepts like unemployment, the stock market, GDP, inflation, etc. I think this is typical of most social studies classrooms.
But what I’ve found to be highly engaging for students is to include personal finance within some of my lessons. Particularly when discussing the incredible wealth inequality of the Gilded Age in American History.
This time period from roughly 1877 to the early 1900s, is one of rapid industrialization, urbanization and immigration. However, it is the incredible entrepreneurial capitalists of this time period that starts the day dreaming and wondering. The kids are always very appreciative that we’ve fixed some of the problems of Gilded Age society (or at least attempted). But, they always admire the rich capitalists like John D. Rockefeller and Andrew Carnegie, despite any character flaws they may have had.
It is these kinds of lessons in social studies that start a wonderful conversation about wealth and becoming wealthy. Being from a more impoverished district, my students have outlandish views of what it takes to become “wealthy.” Its a great opportunity to hook their attention, inspire, and teach a lesson or two about personal finance.
How to Introduce Kids to Investing
The Hook
In order to introduce kids to investing, you’ve got to hook them in. After introducing the incredible feats of Andrew Carnegie as he built his empire (on the backs of vastly underpaid and overworked employees) and the massive amounts he contributed to charity, I always ask students to define “rich” and “wealthy.”
We generally say that the rich are lavish in their spending and larger-than-life lifestyles. They may have more than enough money and spend large amounts to look the part. It usually takes some coaxing before students will start to identify a difference in wealthy and rich, and why its important. We tend to say the wealthy have built their money, or invested it, and like to preserve that wealth. They may have expensive homes, but they don’t waste money.
After discussing what it means to be rich or wealthy, I ask students to guess how many students in our class (without saying names) are going to BE wealthy when they are older. This is often 2-3 kids, and you know they are often referring to the top performers in class (we can discuss THAT another time). Then I ask them, how many of you have the ability to become wealthy. This usually results in clarifying questions or a long moment of thinking, before a fairly similar answer to the first.
Right after that answer comes out, I ask them what tool or asset that they have that will give them the BEST chance to be wealthy. This ALWAYS results in some combination of work ethic, intelligence, or going to college. I wait patiently, ask for any more answers one more time, and then tell them, “it’s actually time.” (Insert witty joke about best friend co-worker who’s close to retirement here).
Then, I hit them with the pitch- “What if I can show you one single tool that can make you wealthy in fifty years (by the time you are 65)?” They usually scoff, make some rude retort like “if you know then why are you here?” or they shift in their seat quietly in anticipation of my answer:
Compound Interest!
Introduce kids to investing early and it’s like the saying about teaching a man to fish. Compound interest is the net they are going to cast to catch their fish. I show them a simulation on a compound interest calculator and run through some numbers with them.
I start them off with this and show them what it looks like to put money aside and it just sit.
What I’ve found most effective for showing this to students is to adjust the investment time span first, year by year up to 50. The kids get to see how the chart grows but that its all money you put aside and it hasn’t earned any interest.
After updating the chart to show their contributions over a 50 year period. We discuss how much $100 per month really is, and what else we, or our families, willing spend $100 on a month that could be replaced with investing instead.
Now, comes the fun part!
I slowly increase the rate of return and identify what the returns would be for a typical high yield savings account, bonds, and the stock market average.
These numbers and how quickly they grow with higher rate of return starts to pop eyeballs out all over the room.
To seal the deal, I hit them with the “Mr. ___ is REALLY close to wanting to retire. Is it too late for him to retire wealthy?” And I give them the following scenario to compare.
They get to see how Mr. ___ even with TWENTY times the starting investment AND monthly contribution doesn’t even come close to what they could get over 50 years. I clearly write down that Mr. ____ invests 20x what they do, but they have 5x his time to invest, and in the end…. YOU win out by over 4x what Mr. ____ will have.
If that doesn’t absolutely blow their minds and make them want to run home and research investing (or as happened today- just do it during a Spanish quiz…), I don’t know what will!
As one girl today exclaimed “Wait a minute! I could be rich?!” Well, wealthy, not necessarily rich, by our definition. But, yes you could do this too. And heck, any teacher explaining this could and should be TRYING to do this too.
Introduce Kids to Investing
I always give a very quick rundown of what typical advice says about how to invest and why to invest after showing these simulations to students. I usually have that one “hindsight is 20-20” student who tells me we all should just invest in Amazon or Tesla, or “find the next one, yanno?” Generally, I tell my students at that point that you definitely could, but you could also lose a lot of money hunting for that next BIG stock, and that if you do broad, total stock market index funds, you’ll always have that next big stock in your fund.
Obviously as a teacher, I have an advantage that your average parent may not. I am able to play off the emotions, reactions, and combined knowledge of my class when hooking students in and teaching them about investing and compound interest. However, as a parent, you absolutely can do a similar scenario, and then show your child, niece, nephew, grandchild, step-child, cousin, etc. your own accounts and how you do it. Just make it fun, personal, and help them to see all the possibilities that regular investing can result in.
What other tools or approaches have you taken to inspiring kids to want to invest and learn more about personal finance?
If you are looking to jumpstart your personal finances, sign up for our email list and receive your FREE COPY of the Jumpstart to Building Wealth! Fill out the form below and click Download Now to get your copy right away!
Wonderful work! This is the type of information that should be shared around the internet. Shame on Google for not positioning this post higher! Come on over and visit my website . Thanks =)
Its like you read my mind! You appear to know a lot about this, like you wrote the book in it or something. I think that you can do with a few pics to drive the message home a bit, but instead of that, this is excellent blog. A great read. I will definitely be back.
Thanks for your publication. I would also like to say that the very first thing you will need to conduct is verify if you really need credit score improvement. To do that you have got to get your hands on a copy of your credit file. That should never be difficult, since government necessitates that you are allowed to have one free copy of your credit report every year. You just have to ask the right folks. You can either look into the website for the Federal Trade Commission or contact one of the main credit agencies straight.