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Ever have a high school class with a mock stock picking contest? If not, you probably didn't get the headstart that some kids received in their financial education. But your kids don't need a class to teach them about the stock market; you can teach them the basics of investing yourself with a little bit of old fashioned home schooling and you should try to make it fun, interesting and challenging.
Game Mechanics:
First, you'll need at least two people to enter this competition. Having more players is great and if you can get the whole family involved, this game can be even more fun. Allow each player to pick 5 companies to invest in. To make the game easy for the kids to understand, give them each a thousand dollars to start with. Any child who knows how to add and multiply should be able to play along. Put together a simple spreadsheet to demonstrate the basic math - that the price multiplied by the number of shares equals the investment. Take the time to make sure they have a firm grasp of this concept. This way, they'll understand why they have more or less money when a stock price changes. Your spreadsheet should look something like this.
What to Invest in:
Try to stick which household names that kids instantly recognize. Think of a list of publicly traded companies that your kids interact with - McDonald's, Disney, Netflix, Apple, Safeway, Mobil, Toys R' Us. The more your children understand about these companies, the more meaningful the game will be. For your own choices, try to choose companies that your kids might not know but which have business models that you can easily explain - take for instance Boeing or Fedex. Yahoo Finance is a great source of information on the companies in the S&P 500 and you can follow this link to get a list of every company in the index.
Update Frequency:
Once you have your picks, it will be easier to track all the price changes using an online portfolio from a site like Yahoo Finance. This will make it easier for you to collect the price information, however, it might be even more educational to teach your kids how to record the price in a spreadsheet. You can also do it monthly but kids don't have that kind of attention span. Make sure that you also keep track of the S&P 500 Index so you can compare each portfolio's change to the S&P 500. That will allow you to explain the wisdom of investing in mutual funds.
Scoring:
Scoring is based on the market value of each stock plus any dividends that are paid out to shareholders. For simplicity, especially with younger children, you can exclude the dividends but it's vital to explain to older kids how a company's earnings are distributed. Also, don't forget to adjust for any stock splits. Track the progress of each player's portfolio in a graph. Each week, hand out a five dollar award to the player with the greatest weekly gain (or minimum loss) and give out another dollar prize to the player who has the biggest portfolio. If the same player wins both prizes - give them an extra fiver. Cross your fingers and hope you win every week so the kids don't drive you bankrupt.
Learning:
Try not to focus on who wins or loses but the reasons why there are winners and losers - initiate a discussion to try to figure out why one stock went up and another tanked. Find noteworthy news about a company that relates to the stock price movement. Stocks move for all kinds of reasons, but its nice to link earnings reports, major product releases, and negative news to price movements. With 15 to 25 total companies, there should always be something to talk about. The easiest way to do this is to begin the discussion with the company that had the greatest up or down price movement and then search for related news. If you have your portfolios set up in Yahoo or another service, the news will show up in your email.
How Long?:
If you are running this game weekly, a good rule is to play for 20 weeks, but ideally, try to keep the game going for at least a year. You could start on a weekly schedule and move to a monthly update frequency. This might work better with older children.
Give this stock game a try and see if it isn't one of the best home schooling courses your kids will ever attend. Learning stock market fundamentals and the virtues of saving and investing is the kind of learning experience that is best taught by parents.
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