Fun Way To Teach Teenagers About Stock Market (unexpected results)

– Posted in: Investing

Learn the fun way I taught my teenagers about the stock market. It’s fourteen years later. I’ll tell you what worked, and what didn’t. They don’t teach this in schools. It’s great if you can do this at home. Please share your ideas. What worked for you?

Transcript for How to teach teenagers about stock market? Unexpected outcomes.

Do you want your kids to learn how to save and invest wisely, and to not get ripped off? Well, they don’t teach this in schools. Here’s what I did with my teenagers and the unexpected outcome.

My son was 15. I wanted him to start thinking about careers that would interest him. I wanted him to have a concept of what companies do. I wanted him to start to understand about stocks and investing. I had a great idea, and now, 14 years later, I’ll tell you what worked and what didn’t.

To teach teenagers about stock market, it must be fun.

First, how to make it interesting? I gifted $1000 to each of my children to invest any way they liked. The money was theirs, but they could only use it for an adventure they otherwise wouldn’t do – so they couldn’t buy a car with it, or something mundane like that.

The year was 2000. I thought this was pretty good idea. Stocks were in the news and were at record high. I had visions of my kids flipping thru the glossy pictures in their annual reports thinking about careers that might interest them.

My son invested in Advanced Micro Devices Inc, Cisco Systems Inc, and Worldcom.

14 years have gone by. The stock market is again setting record highs. I’ll show you his surprising results – with his permission.

We were all very excited about the Internet in the year 2000.

The price of AMD went up, so he sold all but two shares to buy 8 shares of CSCO. Those 2 shares later split and became four shares which he just sold for $15, less a $10 broker fee, or a total of $5, or an overall loss of $70 bucks.

He just sold his 8 shares of Cisco for an overall loss of $356 bucks.

Well, where’s Worldcom?  That’s long gone. When there a bankruptcy like this, the first claims to their assets go to employees and vendor invoices. The next in line are the bond holders. Common stock holders are the last in line, which was pennies in this case.

The unexpected outcome is that after 14 years, the $1000 turned into $235.90.

The other day I asked him, “What lesson did you learn from all this, if any?” He replied: “Investing in individual companies is high risk.” Well, that’s a good lesson to learn.

Was the lesson worth the price?  Would a book have worked better? On my website I list my favorite books for beginner investors. That would have been a lot cheaper, but you have to be ready before you can learn from a book.

Even back I was an advocate of low-cost mutual funds. Why didn’t I encourage them to do that? Well honestly, this was more of a teaching device than an actual investment. I felt that mutual funds are more abstract than owning individual stocks.  On the other hand, $1000 was enough for a minimum investment in some mutual funds. Admittedly, if they had done that they would have more than doubled their money if they held it until today.

What are your ideas?

What would have worked for you?

What other techniques teach common sense investing and differentiate it from speculating and gambling?

We’d love to hear from you in the comments below.

Thanks for watching.

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  • Peter Ross August 27, 2014, 4:45 pm

    i agree. Most people can’t learn from a book until they’ve learned from experience. I’m that way too. I had all the books, but, needed to experiment for a few years to understand that it was all right there in the first book I read.
    thanks again for what you do Rick.