I was just at a back-to-school Board meeting, where I suggested that we add something to the curriculum: teaching the high school kids about the stock market.

You should have seen the looks I got. Stares. No reply for a while. And these are intelligent people, each one successful, making enough money to send their kids to private school. Then someone laughed.

“That’s all we need. To be sued when underage kids start day trading.”

I knew that most adults have a fearful, adversarial relationship with money, even if they’re successful earners. If they do invest, many trust their brokers or financial planners with all the decision making. What I didn’t predict is that they’d rather raise their kids with the same fears and anxieties, rather than risk helping them.

Now, I don’t think this is intentional. I think it’s a deep emotional disposition, conditioned by our society. So, of course I started busily outlining how the lesson plan would work, how it would fit nicely as a special, experimental curriculum addendum to either math or social studies, depending on scheduling preferences of the faculty, for the spring semester, 2010. And I volunteered to be the guest teacher.

I’m not all that good at taking no for an answer.

Here’s the approach and rationale: First, the lesson will include the fundamental of buying stocks (see Teach Teens What Stocks Are and Mutual Funds Give Teens a Feel for the Market posts.)

But then comes the really deep part of the lesson: Are you someone who should invest in the market at all? What is your investor personality?

If people wait until they’re adults to ask these questions, it’s too late. The fearful, distant, dysfunctional relationship with money has already sunk in. It’s like waiting until you’re 25 to have your first kiss. Picture the implications of that one.

The most important part of the lesson addresses the fear that surfaced immediately from that Board member: That they’ll become gamblers. So the disposition of the classroom lesson should be that despite the post-modern philosophy that everyone should be a stock investor, it’s not true. Some people should not.

Now, in most cases, this class will never be taught in high school. I’ll keep you posted about whether they actually let me do this at the very progressive school where I’m on the executive committee of the Board.
And that brings me to the point. You’re the one who has to teach your kids about investing, even if you don’t know a thing. It’s up to parents, just like explaining that butterfly in the stomach feeling after your first kiss.

You answer the teen questions about love: How did you and Dad first meet, how did you know you were in love, how many boyfriends did you have before you got married? (My husband claims I give a different answer every time.)

These are much tougher emotional questions than which companies to invest in to start a good life savings program, and how to have a healthy relationship with money and earning so you’re not broke and stressed out by the time you’re 40.

If you think about it, nothing causes more stress in adult lives than money, so why would we even trust these lessons to institutions like school? Investing money is all about what your personality is like. Do you like risk? Are you obsessive? Are you too laid back? Who knows your kid as well as you do? No one.

You must bring the “should you be a stock market investor?” lesson home. Here are some suggestions about how to find out your teen’s investor personality, after you’ve explained the fundamentals—using our previous posts, as well as the resource links below. And remember, if they don’t want to invest in stocks, the investor personality questionnaire can lead the way to you helping them decide what they should invest in, given their dispositions.

This, of course, isn’t an absolute determination, just a guideline. The important thing is to have a structure for the dialogue you’ll have with your teen. When I’ve tried this questionnaire with teens and college students, they often tell me what their investor personality is, and ask to be taught about specific investments. One teen said to me:

“I’ll obsess if I invest in individual companies. Aren’t mutual funds a bunch of companies, and less up and down in price?”

Great question, and I immediately focused on mutual funds in this teen’s area of interest: greentech.
There are some side benefits of teaching your teens about their investor personality: What they learn can help teens with a lot of other things in their lives: school, dating, jobs, depression, angst. Analyzing how to approach money in a healthy way can be a great lens into general problem solving.

The Stock Market Personality Questionnaire:

If they’re 13, they’re ready to start. Sit down with your teen and make a personality profile, answering these questions:

• How much money would you like to earn by the time you’re 25?
• Are you easily stressed?
• Are you an overachiever?
• Are you obsessive if you don’t get something right?
• Are you high strung or laid back?
• How many extracurricular activities do you participate in—none, two or less, three or more?
• Do you play sports?
• How competitive are you?
• What sort of student are you? Straight As, As and Bs, Cs?
• What is your favorite subject?
• Are you well rounded in your interests—some sports, time with friends, time doing nothing.
• What is your favorite hobby?
• How much do-nothing time do you have each day?

Do the personality profile questionnaire yourself, especially if you fear investing. Your teen will feel more comfortable answering these questions if you answer them, too. Answer the ones about high school by remembering what you were like in high school. Your teen will love this part.

Okay, when you have your answers: If your kid is high strung and overachieving—busy every waking hour, expects to make a $1 million by age 25, driving all over the continent on Saturdays to play different sports—it may be a huge miscalculation to assume he or she would be a stock investor that doesn’t get stressed. They may be very good at it, but they should be aware that it could cause them stress, especially if money is really important to them.

What’s fun is that the kinda lazy, dreamy kid of yours at home—the one snoring at noon on Saturday instead of playing on three different sports teams and belonging to six different school clubs? You may have a sleeping giant on your hands. You may worry that they will never amount to anything, but with some training these personality types are sometimes great money minds.

Being relaxed without too great a sense of urgency is a definite plus in investing. And the ones who let themselves be kids, not in too much of a hurry, tend to think long term. They tend to have patience with money matters, too—perhaps the single most elusive quality for any of us.

And guess what: long-term investing theories make for the healthiest relationship with money. In fact, long term thinker and well rounded kids are arguably the best investor profile, according to studies done by the Jump$tart Coaltion, a non-profit organization devoted to teaching kids about money.

Try to teach all teens about the soundness of long term investing, and if that doesn’t appeal to them at all, then steer those teens away from stocks altogether—bonds, mutual funds and CDs (are all good options.
Show your teens the following two profiles:

This one is of a kid who should never invest in the market: Addictive Gambling Personality: Bad Boy Cole Bartiromo.

For comparison, here’s a stellar kid personality for investing, Damon, The Golden Boy of Stock Buying.

Ask what they think of these profiles, and where they think they fall on the investor spectrum.
Once you’ve decided what sort of investor personality your teen has (and you, too!), then steer them in the right direction, get them started learning what to invest in. Here are some resources:

• Jump$tart Coalition - A non-profit organization devoted to educating kids. A great resource for parents who don’t have a savvy relationship with money.
• Sharebuilder - Custodian stock trading accounts are available here, so parents can start teens investing with a watchful eye.
• Financial Planning Association
• MoneyTrack - PBS’ website for money management shows.

The overall lesson here is to find a relationship with money that is tailored to you. If that expectation starts in teenhood, it will last a lifetime.

Stay tuned. Soon I will post profiles of teenage investors who have done quite well. We’ll see what they read, what their online sources have been, what role their parents played in their stock market education and trading process. You’ll see that many of them do not have money savvy parents, but those parents helped anyway.

Please share any stock training stories you have.

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Mutual funds can be fun for kids to learn about because it’s sort of like watching team sports. Stay with me here, I promise this analogy will work. An individual stock is like an athlete in a non team sport—a golfer or tennis champ. You watch them to see how they compete, how they stack up, how much they win. A mutual fund is a group of people, a team that competes with other teams to see who makes the most money.

Make sure to have kids learn the buying stocks lesson and the municipal bond fund lesson (links here) before moving to this general mutual funds lesson.

Here’s a three-step lesson:

1. The definition of a mutual fund: It’s literally a collective investment scheme where a licensed investment manager pools money from different people to invest in a combination of stocks, bonds, and money market instruments. The manager trades the pooled investments on an ongoing basis.

Major brokerage houses, like Smith Barney, build their reputation on their ability to select combinations of stocks, bonds, and money market vehicles to produce the best return on investment.

Mutual funds come in many different flavors. There can be high tech mutual funds, for example, where are all the companies included are high tech companies. They can get even more granular than that. There are telecommunications-specific mutual funds.

Mutual funds have their own tickers, and anyone can look at the companies included in the mutual fund.

2. Google three different types of company stock based mutual funds: global investments, high tech, and social responsible investing.

Have your teen look at what company stock is being bought for mutual funds in these categories.
The reason I chose these three categories is that they tend to interest teens. Yes, even the global one because it gives them a world view. Many want to travel, and for them to understand what investing in companies around the world is like gets them in touch with that feeling.

3. Choose two mutual funds in one of the three categories and track performance for three months. By clicking on the ticker of the mutual fund, you’ll prompt a list of companies in the fund. Kids can see how the fund manager is selling. Tell your kids to watch Bloomberg TV or CNBC —or read the business news online— and then look at their mutual fund values change.

The most important aspect of understanding mutual fund investing is realizing that a fund manager is buying and selling stocks in the mutual fund daily, even hourly, depending on the news. The fund manager is like a coach of a team, pulling players in and out to create the winning strategy.

Have your kids see which coach ends up with a winning formula. Have them write down any patterns they notice in the buying and selling. For example, are certain stocks bought and sold more heavily than others?

Please share stories about your kids experience with this lesson. They come up with such great stuff, like deciding which stocks are “anchor” stocks, the equivalent of a superstar team player.

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