I recently volunteered to participate with Junior Achievement to teach financial literacy in schools. A couple months ago, I helped teach an introductory class to a group of grade 7 students. I think they felt it was like drinking from a firehose. I’m sure that three hours is not really enough to internalize the financial principles that help people make successful decisions in life, but it’s certainly better than not teaching anything.

This past week, I spent an hour with a grade 9 business class, and really enjoyed it. The program is called Investment Strategies Program, and it includes a stock market simulation. I will visit the class four times (for an hour each), and between the third and fourth lesson, the students will participate in a six week stock market challenge.

I was concerned about whether or not this program would be relevant to them. How many 15 year olds have any experience investing in the stock market? At this age, they probably don’t even have enough savings to warrant buying a stock. But because it was a business class, it made sense to talk about raising funds for a business, sharing ownership, sharing profit and lead into dividends and primary and secondary markets for shares. For those who are unsure, the primary market is when a company raises money by selling new shares, and the secondary market is where shareholders buy and sell shares from each other (without affecting the capital of the company). Primary and secondary trades all take place on the stock exchange.

We talked briefly about valuing a company. Only briefly, though, because there are no hard-and-fast rules. The important concept was the P/E ratio, or the relationship between the earnings of the company, and the price an investor is willing to pay for those shares. Shares in a stable company might be worth 12 times its earnings (a 12-year payback), whereas a smaller, riskier company might be worth only 8 times its earnings. But what if those earnings are growing quickly, like Apple (AAPL)? The kids were 2 years old in 1999-2000, so I briefly described the tech bubble and crash. They could relate much better to the crash of 2008 (although the cause wasn’t the same).

Finally, I showed them how to look up a company on Google Finance. It’s not the only tool, but it’s very usable. I showed that Apple has fewer shares outstanding than Bombardier (an example in the JA materials), but a higher share price. We compared the market cap, to further solidify the idea that a stock is a share of a company, and the number of ways the pie is sliced doesn’t affect the size of the pie. As such, the dollar value of a share means very little.

In future lessons, we’ll explore how to filter and choose stocks for investment, and then pretend to gamble in the market to find out who can make the most money in six weeks. I’m skeptical the kids can learn about long-term investing by playing the market for six weeks, but I think the first lesson offered some useful ideas about the world of business. What do you think? Should all students learn about how business are funded and why that presents opportunities for investment? At what age?

As an aside, I pointed out that financial math is relatively simple. Their teacher thought it was a good idea to point out that they’ll probably never use any high school math after they finish school. In my case, that’s mostly been true, but I don’t regret learning math. And some of these kids might become engineers. Bonus question: do you think requiring all students to learn high school math is wise?

Wow, do you think that teaching kids writing is valuable – even if they don’t become writers? As a teacher of almost 40 years, I tried to involve all the different content areas to try to teach kids how to THINK. To expand their awareness of the world around (and within) them. It is a truly accelerated pace of change happening, so who knows what skills these kids will need further on down the pike…..

So, a long-winded Yes to teaching math in high school.

It is so great that you get to pass on some knowledge. I wish I had classes like these. Students should totally understand the fundamentals at a young age. I think this would greatly reduce the confusing surrounding investing.

I would say that regular high school math is not 100% necessary. However, Physics ( from taking many math courses) is a course I would not want to give up. Physics helps you understand even the basics of things. But physics requires a good knowledge in mathematics.

I think that’s awesome and wish there had been a class like that available to me in high school. I know very little about investing and am now just trying to figure it out on my own. If I had even a basic understanding that had been taught in school I’d be much further ahead. You may not realize how much disposable income those kids you’re teaching have but if even one of them takes something away from your class and invests the money that they would have spent on a new pair of shoes you’ll have made a huge difference in their future financial picture! A few years ago there was a high school kid that worked at our shop that was very smart with money. I think this came from his parents. He worked two jobs- one of them as a bank teller. He bought a house once he graduated by the university he would be going to and rented it out to fellow students. I wasn’t financially dumb when I was that age but I wish I’d been able to look ahead and look at the big picture when I was his age. If so, I might be half as far as he is at a much younger age than I am. The younger the better!

Sounds like you’re teaching them to chase cap gains as the main money maker. What about dividends and DRIPs?

I think high school math is a good thing even if you don’t use it in the future. It teaches you to think. So even if you don’t use it again it will have taught you to use your brain a different way and should help you to solve other problems down the road.

Thanks for all the great comments!

Banjo Steve, I’m not advocating against high school math. But I think you’ll admit that high school teaches higher levels of math, but not higher levels of writing. By your reasoning, all students should be taught fine arts, music, theatre, collaboration, presentation skills, business, investing, accounting, design, computer programming and others, just in case. All I’m suggesting is that math is overemphasized compared to the many other subject areas that are valuable.

Stu Lach, I personally collect my income in dividends, so there’s no chance I’ll forget them. I believe I emphasized both dividends and capital growth as sources of return on investment. But a six week market simulation can only reward capital gains, which is feedback I will provide to JA.

Jim, I tend to agree about learning things that aren’t used later. They are useful because they teach a way of thinking and by providing successes, they build confidence. But wouldn’t an introduction to economics or business, or courses in computer programming or a foreign language, have the same benefits? Why do we require high-level math instead? I don’t think it’s wrong, I’m just trying to question one of our assumptions.

Students should know financial math at least, as in understanding how they can get into trouble with credit cards, the meaning and curse of interest, how mortgages work as with other loans. But it is a sad state of affairs when a question of whether or not students should learn high school math can be asked with a straight face. These days, they can barely do the times table. They rely on calculators for simple math. Pathetic!

Awesome Robert! That’s exactly what high school students need. Even if you can’t teach them as much as you’d like, you’ll get some great lessons in. Perhaps to fuel their fires to keep learning.

As for math in high school, absolutely vital. But teaching financial math would probably benefit more kids and would be something they would continue to use every day. The higher maths are just too specific. As an accountant I use math everyday, but it’s not the kind I learned in high school!

Good post and replies here. I suppose I agree the most with Ramona about financial math being more useful than advanced math as a requirement. (Robert, qhat exactly do you mean by “advanced math” anyway? Calculus?) I would not mind seeing some kind of basic economics taught because that is how the world works and it taught me how to think (I majored in economics in college) better.

A good business writing course would be good, too. I never really learned how to write until I began working. I had to combine what I learned in a college writing class with what my immediate boss taught me in my early days of working, with an in-house business writing class I had a few years into my working years. I found that learning how to write well fundamentally (i.e. grammar, syntax, spelling and style) helps to be taken seriously in everyday life and was more valuable than learning how to play with spreadsheets.

Three more things – many in high school have part-time jobs (I did when I was 16) so they have some disposable income and/or are saving for college. Many are going to take out student loans soon so teaching them how interest works relating to those loans will be useful and relevant very soon. And how to complete a simple income tax form (1040EZ, pretty easy, or “EZ”) would be a nice addition, too.

Canuckguy, I agree that students need to know about the cost of compound interest. But there’s a big difference (in my mind) between being able to calculate it, and really understanding the meaning of it. How do you connect students to the feeling of being in debtor’s prison? I’m not sure, but that’s why I’m teaching the “time value of money” calculations. Hopefully a few example scenarios will help. I’ll write about it next week.

Ramona, I agree about the math that I used after high school. Being able to do multiplication and division in my head, as well as estimating, are very useful. And learning to learn allows the students to develop a desire to keep learning, as well as giving them the tools to learn the more specific skills they need in their jobs.

Deegee, great comment. I agree that Economics, specifically introductions to macro- and microeconomics, felt like some of the mystery of how the world works was being revealed. Examples of high school math that I never use are: trigonometry, linear algebra, solving polynomial equations and calculus. It taught me how to think logically and express those thoughts in numbers and equations, so I don’t think it’s a waste. But I wonder if we should really value it more highly than other forms of learning.

What a great idea. Real life examples are such a good idea. I think every kid should have to learn at least the basics of finance. For their own sake and their parents!

ahhhh…..I cannot believe the teacher told the kids that!!

I teach Geology labs at a university and am appalled at how inept most students are at most basic math skills. Using map scale is like torture for some of these kids. They have no idea even how many cm are in a km….it is nothing short of an embarassment.

To top it off, in my second year structural geology lab a simple 3 point problem caused great distress between the prof and myself. I teach it the engineering way, the way it should be taugh especially for anyone wanting their degree in Geology..but the prof wanted me to teach it an easier way so that the kids didn’t have to use trig functions. I stood my ground but told the kids if they wanted to learn the other way they could go to the prof….then I told them that he did not think they could understand the way I taught it…and guesss what–they took the challenge and did it my way, and did me PROUD.

Math is good and needed. How much carpet do we need, how many gallons of paint, and so on. How much do I save if something is 40 % off? (and yes, this is how simplified some high school math courses are)

Rant over….good on you for teaching them the stuff you are teaching. I never learned that and am still very uneducated in that regard. Where would be a good place to start?

High school math is absolutely essential! Sheesh.

Even if you don’t use it again, it is the basis for understanding many things. Statistics, physics (e.g. scaling of numbers), computers, language (yes, math is used in language skills), logic, construction, accounting (what’s that bit about compound growth, eh?), etc.

Back in the ’70s down here in the USA, we did the stock market lesson in 7th & 8th grade. JA doesn’t kick in until high school, but at least we’d already had exposure to capital formation and markets.

Lorain, there are two things that I take from your comment. First, students need to really understand basic math, especially multiplication and division. They should be able to do it in their head, especially since it forms the basis of unit conversion, scaling, paint, carpeting and discounts. Second, students who have a strong foundation in basic math are able to learn trigonometry and other forms of more advanced math (probability, statistics, etc) when it becomes necessary and useful. I’m not sure where there’s a really good introductory personal finance course online, but you could try http://www.getsmarteraboutmoney.ca/ If I find anything better, I’ll blog about it here in future.

George, unfortunately statistics is never taught in high school in Canada (that I know of), business and economics are optional, physics is only required as a unit within Science 10. I agree that math is useful in many ways, but to be honest, I’d rather see students gain a meaningful understanding of statistics rather than calculus (which was optional when I took it). I’m certainly not campaigning against math.