Exciting start to my summer teaching assignment at a local high school in East Palo Alto.  I am teaching three sections of rising 9th graders a curriculum that I have honed over the past three years.   How would I describe it?  Chock-full of real-world activities while developing decision-making skills focused on the the future.  I like to think of it as a class I would have enjoyed when I was fourteen.  Over the next six weeks, students will buy a stock, choose a savings account, select a credit card, learn about ways to pay for college and create a personal finance PSA to teach a concept to their peers.   I thought I would spend an hour after each class writing about my impressions of what worked and didn’t work so I can continue to improve the course.  So, what happened yesterday?

Students provided brief introductions about themselves and what they hoped to learn in the course.  The three topics that came up most frequently in all three classes were how to save money, paying for college and investing in the stock market.  Other responses that caught my attention were students wanting to learn how to make better financial decisions (my hope is that the decision-making techniques taught in class will be what they remember), how to use credit responsibly, and students who wanted to learn how to start their own business (good to see that entrepreneurial spirit in young people)!   

Introductions out of the way, the students engaged in a Scavenger Hunt activity.  Each had a list of twenty personal interests, activities or traits (e.g. dances the salsa, has earned money from a job, has a bank account).  In ten minutes, students had to find others in the classroom with that particular interest, activity or trait.  Great activity for first day of class for students to get to know each other.   Observations:

• As ten minutes proceeded, students moved from talking in small groups throughout the classroom to concentrating in one area of the classroom.  Ultimately, students figure out that most efficient way to get information was not one-to-one but one-to-many.
• In each class a small subset of students approached the teachers to see if we could put our name next to any of the twenty items on the list (it seems only old people read newspapers daily which was one item on the list!).  Important lesson to learn to use all the resources available to you.
• The list also provides opportunity for teacher to gauge student’s experience in financial matters:  how many have a bank account or have earned money in a job or have an interest in the stock market are all items on the list.  
• Great way to segue into important life skill:  networking and the ability to relate to others you don’t know.  Asked students how many had talked to students they didn’t know before today.  All raised their hands.  Highlight the importance of getting to know many of your classmates and also stepping outside of your comfort zone as meeting new people can be stressful for some.  

After running students through the syllabus, the core activity for the 90 minute class was to teach students about investing by having them pick a stock or index fund.  Each student was given $10 (real money) which they could use to purchase one of five investments.  In selecting their investment choices, I wanted a combination of low and high growth companies that they were familiar with.  I also wanted to include an index fund given my belief that over the long-run having low-cost index funds at the core of your investment strategy makes a lot of sense.  So, which companies did I include:  

• Growth:  Facebook, Chipotle
• Value:  Wal-Mart, Apple
• Index:  S&P500

The challenge:  How to provide students with enough information in 30 minutes to decide what to invest in without overwhelming them?   Here was the progression that seemed to work OK:

• Compared saving to investing.  Opportunity to discuss FDIC insurance and why saving at bank is safe but in today’s low-interest rate environment, earning almost no interest.  Investing involves more risk.  Stocks over the long term have earned 8-10% per year but the ride can be bumpy.  
• What does it mean to own stock in a company?  Part-owner, can vote for Board of Directors who hires management.
• What is the S&P500?  Good opportunity to teach students about diversification.  Risks that come from owning one stock vs. owning an index that contains 500 of the largest companies. 
•  What makes a good investment?  Ultimately, investors like to see growth in earnings.
• What are earnings?  Went through a basic income statement for Chipotle with student input.  
  • When you pay $5 for burrito that is sales or revenue for them.
  • Students had fun listing all of the costs of running a Chipotle restaurant (food, employees, rent, fixtures and equipment, utilities).
  • Earnings or profits are what you get when you subtract Total Costs (or Expenses) from Sales. 
• How do companies grow earnings?  Students provided input on how each company can grow (new products (think Iphone 6), new restaurants (Chipotle still has lots of geography to cover), more customers, existing customers buying more, etc.)
• Oh, but let’s not forget about valuation too.  Instead of a price to earnings ratio discussion, I referred to it as a Popularity Ratio.  I showed a chart with P/E ratios on it and students were quickly able to see that Facebook was the most popular stock with P/E ratio over 80 mainly because they had the highest projected earnings growth of 60%+.  Used this opportunity to discuss relationship between risk and return.  More popular stocks can be risky because they can become unpopular quickly if they don’t meet growth expectations.  

After giving students the opportunity to ask more questions, their task was to select a stock and provide a rationale for why they want to own it.  They wrote down their responses and I encouraged them to discuss with their neighbor.  I circulated around the classroom and pushed them to give me reasons for their decisions.  Several students who chose S&P500 clearly understood the benefits of diversification.  After students had made their decisions and filled out stock certificates in ink (I had blank templates), one class asked me which I would choose.  Gave me the opportunity to tell personal anecdote of how I lost $1,000 on my first investment in a company called CheckRobot and why I have been a buyer of index funds since.  

Students can cash in these stock certificates on the last day of class or hold on to them until they graduate in four years.  Since they had $10 to spend and each of the stock prices were in the range of $60-$500, there was an opportunity for a quick calculation to determine what fraction of a share they owned.  In order to collect on their investment, they need to do two things:

• Calculate how much I owe them.
• Write a paragraph about specific factors impacted the stock price of their company

What could I have done better with this lesson?

• Make clearer to students that the investment they are making involves real money by describing various scenarios..if Facebook stock rises 20%, I will owe them $12.00.
• Less time on personal anecdotes so students could have more time discussing their stock ideas.  Ran out of time at the end of class as I would have liked to hear student’s rationale for investments.  
• Have students jot down 1-2 goals they have for the class and then ask them.  I didn’t give students time to think about this which led to some groupthink when it came to their initial introductions.
• More time to wrap-up and let students provide key takeaways on the investing activity
• Networking for career may seem a long way off to students; highlight how networking can help them in high school
• Get more students involved by cold-calling more frequently.  
• Take out slide re:  money skills.  Students will learn this as we go so don’t take time to talk about it now.  
• Show how stock markets work by going to Yahoo Finance and typing in a ticker and watching real-time how it happens.  

Anyone interested in a copy of my class materials or syllabus, ping me at tranzetta@gmail.com

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.