When to start teaching children about investing

Investing is one of those things just for grown-ups, right?

Not necessarily, according to Melanie Mortimer, who heads the foundation at the Securities Industry Financial Markets Association (SIFMA). The SIFMA Foundation encourages understanding of financial markets with programs like the Stock Market Game and InvestWrite.

“Fourth grade, for us, is the sweet spot” to start learning about investing, said Mortimer. “When you’re nine, 10 years old, you’re learning about fractions; you’re learning about decimals.” That provides a natural segue to teach kids about stocks of a company, or slices of the pie, she said.

“Students are very excited about the idea of money,” said Mortimer. “The idea that you can take something very small and grow it to be something much larger is very compelling for them.”

“Investing taps into the dynamism of the global marketplace,” said Mortimer. “It doesn’t sit still, and it’s changing and moving on a moment to moment basis, which is very similar to most 11-year-olds. They have a lot of energy, they’ve got a lot of interest; their attention is moving a mile a minute.”

So why fourth grade?

Mortimer said students have the capacity to understand rudimentary concepts that make the global markets work, like owning fractions of a company and trading stocks.

“It’s an extraordinary time of rapid brain growth, and there are so many lessons that students have not yet learned that they don’t have to unlearn,” said Mortimer.

Learning lessons about money while young can even benefit national economies. The World Bank found that not training young people to handle finance can cost a country 2% of its GDP.

“Early intervention has the greatest-long term benefits because you’re laying the groundwork, said Mortimer. “You’re setting the foundation, and you’re doing it at a time that it’s going to open the door for young people to make well-informed decisions that then benefit them in later in life.”

Fourth grade is also the time many students play the Stock Market Game, a hypothetical investing game built by SIFMA that uses real market data (offset by 10 minutes from current data) where students whose class participates are given a hypothetical $100,000 to invest how they choose. Mortimer said 600,000 students play each year, and they have found students are engaging even outside of class time by using the Stock Market Game smartphone app.

“We get emails and letters pouring in from parents saying ‘I don’t recognize my child anymore; he used to run up the stairs and go to his room and close the door until dinner, and now he’s downstairs, he’s engaging the family and talking about finance. He knows more than we do.’”