- The Washington Times - Tuesday, May 30, 2000

Bill Falvey is scooping ice cream on a busy Friday night at a Baskin-Robbins store in Arlington.
The 16-year-old reminds a forgetful customer to take his change, and dispenses some free financial advice.
"Hey, you could be a millionaire by now if you had invested all your spare change in Microsoft a few years ago."Bill has a head start on some of his peers. He has a portfolio of a half-dozen stocks that he owns and trades. He studies up on the companies and makes the purchases through an on-line trading account his parents set up. Most of his stocks are rising in value, which makes Bill happy.
"I started with Microsoft and Coca-Cola," says the Arlington resident and Yorktown High School student, who adds that he got interested in the stock market because he kept hearing about people raking in money.
"The stock market has been flying out the roof, and I decided to get on the bandwagon," he says.

Let's play Wall Street

The stock market's fortune-building reputation is luring many young investors like Bill who hear stories about the riches to be made on Wall Street. At school, students debate the merits of stocks in the hallways. They trade tips on hot picks and visit financial Web sites to gather information.
Many sign up to play the Stock Market Game, a teaching tool that allows students to invest $100,000 of "play" money and track its performance for 10 weeks.
"The kids want to learn about the markets," says Michael Rauer, an economics teacher at Bishop Ireton High School in Alexandria who teaches the Stock Market Game as an extracurricular activity. "They hear about these get-rich-quick stories, and they want to know more about it."
The game, which was developed by the Securities Industries Association, teaches students the fundamentals of investing. Students work in teams for a 10-week period and research companies listed on the major stock exchanges. While the game is in session, students can buy and sell as they choose. When the time is up, those with the biggest gains are declared the winners.
Mr. Rauer's students got a dose of the real world this semester as many watched their high-tech stocks lose value in the huge sell-offs in the financial markets. It was a sobering lesson one that made many students appreciate the benefits of playing with pretend money.
"Mainly they had a lot of fun," Mr. Rauer says. Some walked away eager to study more about the financial world.
"The kids are really sharp, and some of them are really astute about investing," Mr. Rauer says. "A couple of kids really got into it. They would watch CNBC and read financial publications.
"Some even wanted me to bankroll their business ideas," he jokes, adding that he gently declined to be a venture capitalist.

Balanced investing

Educators think the exposure to investing is a good way for students to learn about money, as long as it is kept in perspective. Mr. Rauer, for example, stresses to his students the importance of investing for the long term.
"I've always had my problems with something like a stock-market game," says Lewis Mandell, dean of the business school at the State University of New York at Buffalo.
"To win, you have to have the most extreme risk position, but the person who does strategic investing, they are going to lose," he says. "In a sense, it teaches bad behavior and teaches people to view the stock market as gamblers would."
Mr. Mandell says he gave the best grades to students who created balanced portfolios over a semester of playing a version of the Stock Market Game. Students were required to account for the cost of commissions and the amount of tax they would owe on capital gains.
This approach meant that students who got the highest returns weren't always getting top grades.
"We had some hotshots in the class who ended up getting D's," he says. Students were required to write term papers explaining the choices they made. This helped the students understand how much risk they were willing to take something investors need to understand before getting into the market.
Mr. Mandell says he supports the use of the Stock Market Game with teen-agers because it helps teach financial knowledge, but he recommends that the game be taught in a context that emphasizes balanced investing.
"It's highly interactive and real-world-oriented," he says, "and it's fun."

Parents have a role

The growing interest in the stock market is prompting many parents to seek out educational programs for their children, says Paul Richard, executive vice president of the National Center for Financial Education, a nonprofit consumer education group based in San Diego.
"Parents are afraid their kids will miss out on the stock market," he says. "With so many things on the horizon, parents don't want to be behind the curve."
He suggests parents wait until their children are interested to introduce the concept of investing.
"If the kids are saying, 'Hey, it would be great to have some stock in the Chicago Bulls,' then that is the time for parents to take the initiative," Mr. Richard says. Parents can start with pretend money and track a chosen stock to see how it behaves. He recommends that parents include the price of sales commissions when calculating purchases and trades.
"I believe investing is OK with proper parental supervision, especially if the children express an interest in it," he says. The goal should be to encourage long-term investing, which means holding a stock for at least five or six years, perhaps with the goal of paying for college.
This deliberate approach is what Bill's mother, Paula Falvey, had in mind when she set her son up with his stock-trading account.
"I told him, 'It's up to you how you want to invest this,'" says Mrs. Falvey, who is proud of her son's ability to handle money. Bill's investments are part of an overall savings program that includes a traditional savings account and some money his parents are managing for him.
"He's really frugal he would much rather spend my money," she quips. "He couldn't wait until he was 16 to get a job."
Mrs. Falvey and her husband have a financial adviser who helps them with investing, but Bill is making his own decisions.
"The stocks I researched have done well, but the ones my mother researched haven't," jokes Bill, who says he has been saving money ever since he could count.

Saving and investing

Investment companies are responding to the surge of interest in the stock market by offering products tailored to children. Such mutual-fund companies as USAA and Stein Roe Mutual Funds are leaders in the field. Both firms offer funds that invest in companies children recognize, such as the Walt Disney Co. and General Mills Inc.
The companies send educational materials along with the monthly performance statements that help children learn about the stock market. USAA encourages young investors to write to fund manager Curt Rohrman, who runs the USAA First Start Growth Fund.
One young investor wrote to Mr. Rohrman asking why the fund did not invest in Zany Brainy, where she likes to shop.
"Zany Brainy is a cool store," Mr. Rohrman responded, "but the problem with toy stores like Zany Brainy is that they have too much competition from discount stores that sell more than toys."
He explained that toy stores make most of their money around Christmas, so it's easy for discounters, which sell a wider variety of products, to steal business from specialty stores such as Zany Brainy.
Another investor wanted to know where the money goes when the stock market goes down.
"Super question," Mr. Rohrman wrote. "The answer is sort of weird no one gets the money when the market goes down. It just sort of disappears."
Mr. Rohrman then used the example of a lemonade stand with flagging sales to illustrate his point.
At the beginning of the day, the lemonade vendor sold for 25 cents a cup, then cut the price to 10 cents at the end of the day, he said. The "lost" 15 cents is comparable to what happens when the market drops.
Educators say it is surprising how shrewd some children are about money. When Allen Cox was teaching history in Maryland schools in the mid-1980s, he decided to test out the Stock Market Game as part of his curriculum.
"The kids really took to it," says Mr. Cox, who now coordinates the Stock Market Game among Maryland schools that use it. The goal of the game is to teach children to be long-term investors, he says.
"I used the game with all level of students even those with learning difficulties," he says. "I liked what happened. It got them reading the newspaper and seeing how different events cause different things to happen."
Patrick Jensen learned about the quirks of Wall Street after participating in the Stock Market Game this year at Bishop Ireton.
"It's a lot easier when it's not your own money," says the 17-year-old junior, who was in Mr. Rauer's class.
Like many students, Patrick found his fortunes declining at the beginning of this year as high-tech stocks took a beating in the financial markets.
"I checked, and at one point I was $40,000 in the hole," he says. He recovered those losses when the game ended, but he did not do as well as he did the first semester. "I don't know if I'm ready to invest for real yet," he says.
Still, Patrick walked away from the experience eager to learn more about business. This summer, he plans to take a college course in finance and investments.
His parents and older brother have high hopes for his future.
"They tease me that I'm the businessman now."

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