Financial studies teach students the value of money

PUBLISHED : Sunday, 06 January, 2013, 12:00am
UPDATED : Sunday, 06 January, 2013, 2:47pm

When he was in Form Three, Samuel Weil, one of my outstanding IB biology students, advised me to buy Apple stock. Had I listened, I would have made a 400 per cent profit today.

Sam is now 18 and poised to learn more about finance and banking at university as he looks to a career in wealth management. But his advice raises pertinent questions. How important is financial literacy and when do we start teaching students to manage their own money? Do societal notions of wealth affect our ability to discuss money and morality with our students? Or do we need to reconcile both and teach our students, as Ralph Waldo Emerson puts it: "A dollar is not value, but representative of value, and, at last, of moral values."

My husband and I ticked off most of our "check list" of things we believed our children had to know before they went off to university: piano lessons, dance and art classes, and various sports.

However, our discussions about money were limited to vague instructions on the need to manage within their allowance and save, if possible.

So it was not surprising to read that a recent survey of American high school seniors found they showed a poor ability to make age-appropriate financial decisions. But students with higher financial literacy scores are less likely than others to bounce a cheque and more likely to balance their books.

Several studies show that financial literacy is positively related to self-beneficial financial behaviour. Yet other studies show that high school classes in finance and money management have not been effective in raising levels of financial literacy.

When Sam showed an interest in his uncle's stock trading business, his father got him access to a virtual trading platform to learn the ropes of fundamental and technical analysis. By the time I was teaching him in Form Two, he had his own e-trade account, having invested the money he received for his bar mitzvah.

Sam lost most of his money during the financial crisis but his father gave him another crack at it, saying he believed in his ability to trade well.

"I also learned about diversifying and managing risk, through this experience," Sam says.

Research has shown that high-school students who play a stock market game are significantly more financially literate than those who do not. This implies that classes which are interactive, relevant and fun may be more effective than those that are purely instructive. Studies indicate that students in such classes do better if they are properly motivated to understand why personal financial management is important.

Sam's own philosophy echoes these findings. "Students can familiarise themselves with the finances of the companies whose products they consume regularly, like Coke and Pepsi," he says.

Using a US survey of students who completed a personal finance curriculum supplied by the National Endowment for Financial Education (NEFE), researchers found that in the short run, self-reported financial behaviour improved immediately after the NEFE curriculum. A three-month follow-up survey found that more than half of the respondents reported making changes in their spending and saving habits. Students were more apt to comparison shop, set money aside for the future and repay debts on time. They felt they knew more about the cost of buying on credit and believed that the way they managed their money would affect their future.

I asked Sam how his investment strategies have paid off the second time around. He hadn't been very active in the market in the recent years as he was preparing for his IGCSE and IB exams, he says. "However, I have managed an annual return of 10 per cent on my portfolio."

That is certainly far more than what I and my husband have been able to procure for ourselves, even with the help of financial advisers.

Anjali Hazari teaches IB and IGCSE biology at the French International School