By: Laura Walton AFC®
We don’t teach kids about thermodynamics by letting them play with a box of matches so why do we teach them about investing by encouraging them to play stock market games?
There’s a new stock market game out. Stockpile is a startup designed to allow investors to buy fractional shares of stocks with high share prices – think Apple or Amazon. The Wall Street Journal ‘s headline was Startup Helps Children Play the Stock Market and featured a 10-year old who’d exchanged his Stockpile gift card received at Christmas for fractions of Microsoft, Tesla and Walt Disney. You can get started with just $5 – trades cost 99 cents. You can even use your credit or debit card to make your purchases – for a 3% charge. A $25 Stockpile gift card costs $29.95.
The Stock Market GameTM is widely used in schools today. The website describes it as “an online simulation of the global capital markets that engages students grades 4-12 in the world of economics, investing and personal finance and that has prepared 16 million students for financially independent futures”. It’s sponsored by SIFMA (Securities Industry and Financial Markets Association), the “voice of the securities industry”.
In the TCI Foundation’s 3rd Decade program, we talk about the risks associated with buying individual stocks – it’s really more of a gamble than an investment. For example, would you have bought Facebook over My Space back in 2006?
And we talk about the benefits of mutual funds – created to reduce the risk of owning individual stocks by allowing investors to buy baskets of stock (or bonds) at an affordable price. Yes, fractional shares but of many stocks, not just one.
If trading individual stocks sparks a young person’s interest in capital markets that’s a good thing as long as it comes with a discussion of risk and reward. After all, the matchbox is printed with the warning “Keep Away From Children”.