By Dr. Adam Ylitalo, Guest Writer
Teaching our kids about finances has been a big priority ever since I first stumbled onto the pages of The White Coat Investor 7-8 years ago.
My wife and I have done various save/spend/donate jars, and they understand the difference between paying interest and receiving interest. One of the more challenging areas where we wanted to help prepare them early was understanding the stock market. I remember looking at the reports about the Dow Jones Industrial during the nightly news as a kid and watching the stock ticker scroll across the TV screen. It never quite made sense or held my interest for long.
However, in my fifth-grade classroom, we played a stock game where every kid took the daily newspaper and picked out a hypothetical $10,000 to buy whatever stock they wanted. At the end of a three-month period, the person who “made the most money” won a toy or candy prize. If I recall correctly, this person either invested in Walmart, Toys “R” Us, or Disney. I, however, performed terribly since I invested all my money in a penny stock based solely on the stock price. It promptly dropped in value. It was a memorable event, even though I do not recall the name of the stock in which I invested. It was one of those foundational experiences where I realized that I needed to understand finance.
Fast forward 30 years, and I wanted to see if the stock game would be as big of a hit with my kids as it was with me. In January 2022, I set up a stock game for my family: my wife who has a low interest in personal finance, our 8-year-old son, and our 11-year-old daughter. Fortunately (or unfortunately), we did this at the start of a terrible bear market.
Rules of The Stock Game
Each player starts with $1,000 to invest how they like. You can even choose not to invest it and hold it as cash.
Choose up to three stocks to invest in and after three months, six months, nine months, and 12 months, we will see who has made the most money based on the percent increase for each quarter.
Quarterly Winner of The Stock Game Gets Their Choice of:
- $20 in quarters at the local pizza/video game place
- Ice cream sundae party
- Pizza and movie party at home
- Dinner at our favorite local steakhouse
- $30 at the candy store
- Two hours at Topgolf with food
- Bowling and video games at Main Event
- Spa day
- $30 shopping spree at the craft store
- The one-year winner has the option to go to a favorite out-of-town restaurant for dinner
We purchased the stocks on Friday, January 21, 2022, and checked results on April 15, July 22, October 21, and January 20, 2023.
More information here:
Welcome to the New WCI Investment Fund
How I Teach My Kids About Money
Is Greenlight the Best Debit Card to Help Your Kids Learn Finance?
How The Stock Game Played Out
Immediately, our children went home and started using the stock app on the iPad to track different stocks. Both of my children had seen their fair share of FedEx trucks during the pandemic, so they both flocked to that stock. My daughter had heard that our local Target was going to be expanding, so she felt strongly about investing there. She also loves crafts, so she bought a small position in Joann Fabric. My son added Apple shares to his FedEx allotment. My wife went with renewable energy in BEP (Brookfield Renewable Partners) to promote responsible energy sourcing, and she bought shares of Disney—it's one of her favorite places on earth. I went all in on Rivian as demand for automobiles was increasing, and low inventory hopefully meant we would soon see a large bump in the electric vehicle market, similar to what Tesla had seen.
I purchased all of the stocks into my taxable account, and I also kept track of various other investments—including gold, Bitcoin, the S&P 500, Tesla, and various other stocks our family had discussed investing in.
At the three-month mark, Rivian was down 36.46%, my daughter was down 4.35%, and my son was down 8.40%. The first quarter winner was my wife at a gain of 1.67%. We compared each person quarter to quarter to hopefully have a different winner each time. My son won Q2, I won Q3, and my daughter won Q4.
For the end of the year totals, my investment lost 74.59% of the original value (Rivian shares tanked in dramatic fashion), while my better-diversified family suffered losses in the 20%+ range. The overall winner was my son edging out my wife by 0.39% overall. During a terrible bear market, investing completely in gold would have easily won overall, as it rose 12.79% on the year.
The bolded items below were what we actually bought.
Below is our final table, which includes the total values of our stocks and the quarterly change with the winner of each quarter in bold.
Lessons Learned from The Stock Game
We discussed some well-learned lessons at the completion of the game, including: it’s hard to predict the future; going all in on something can be really good or really bad; and we are incredibly fortunate to be in a financial position where we can afford to play a game like this.
My investment horizon timeline is much longer than a one-year period, so the vast majority of our wealth is invested in boring low-cost indexed mutual funds. But the chance to see how well we could do individually at stock picking was an activity we will be talking about for years to come.
If other WCI readers are interested in teaching their children about stocks, this is an excellent way to pique their interest and have discussions along the way about difficult-to-grasp concepts.
Finally, I’d like to thank my son for picking our favorite out-of-town restaurant to celebrate his overall win! Whether it’s a big win (or, in this case, losing the least amount), our family was able to celebrate each other’s successes in a fun and meaningful way.
[Founder's Message from Dr. Jim Dahle: I think it is great to teach kids and, well, everyone about the stock market and how it works. I definitely try to emphasize to my children how when they own stock (whether in their 529, Roth IRA, or UTMA), they become the owner of a very tiny part of a very large, successful company. They really are owners and share in all of the successes and failures of the business. However, I have always had a problem with The Stock Game, frequently played in a junior high or high school economics class. The problem with The Stock Game, of course, is that it encourages a short-term, gambling mentality. I often worry it teaches precisely the wrong lessons about stock ownership, such as:
- You should check the stock price in the newspaper every day
- Putting all your money in the right stock can help you get rich quickly
- Stock investors are competing with each other rather than against their goals
- Short-term (including quarterly and yearly) results matter
Whether The Stock Game does more harm or good I have no idea, but I wish there were a way to teach kids about the market that did not also teach them all of these wrong ways to think about it.]
Have you ever participated in something similar to The Stock Game? What financial lessons did you learn as a kid? How do you teach your children about money? Comment below!
[Editor's Note: Dr. Adam Ylitalo is a urologist and currently serves as Chief of Staff at Baylor Scott and White-Hillcrest Hospital in Waco, Texas. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]
I think the best source of teaching tools for teens is ngpf.org. While the site and services are designed for teachers, they make everything available to the public. Check out the Question of the Day for interesting table talk with kids. If your school district is not aware of their work you will do them a favor by sharing their information. Michael Jordan’s Foundation just made a $100 million pledge to NGPF over the next 10 years. By the way, they have terrific games that grab kids attention. And everything is free!
Thanks for sharing.
It would have been good to buy 1 share of vanguard index fund etfs as well for comparison, assuming you will continue to track for years. Not too much — VTI (vanguard us total market) is about $215, VXUS (vanguard total international) is $57, VT (vanguard total world) around $100, so could have bought a share of VXUS and VTI and still had $600 for individual stock speculation.
I agree with this, but I would have just set up a 5th fund…a mix of VTI/VUS or something along those lines with just index funds at 1000 bucks. Follow them for the next 5 years. That would do your kids a ton of good. For now it appears they have only learned that buying stocks is a losing battle. This of course is because of timing. If you can teach them about timing the market vs time in the market it could still be a useful lesson, but having the index funds to contrast returns is an outstanding lesson.
I appreciate the comments and the additional resources. I fully expected to be roasted online for this, but it was too much fun to not share it. It’s a reminder at how bad I am (we are) at trying to pick single stocks.
I think I’ll gift these stocks to my kids at some point down the road maybe when they turn 21 as an addition to their UTMA.
I’m glad you anticipated it. Somebody, hold my virtual beer….j/k
I believe the stock games as played in school encourages high risk concentrated short term gambling. It is fun but also leads to short term capital gains when you win. My kids did that game in high school and learned that the stock market is akin to gambling in Vegas. I had to retrain them a bit to take less risk.
Don’t be so hard on yourself. There is always more than one way. Hats off to any parent trying to educate or expose to some aspect of financial literacy. Easier said than done…
I agree with Dr. Dahle. This game teaches kids the wrong lessons. For real stock investing, buy an index fund. The best strategy for this game is to buy the most volatile single stock. They might start to learn something useful if the biggest loser had to pay for the biggest winner’s dinner.
ps As pointed out recently, some of the “words of wisdom” sidebars are not: “Given a 10% chance of a 100 times payoff, you should take that bet every time.” -Jeff Bezos
This applies to a 70 year old putting his or her life savings on a 10% chance of a 100 times payoff ??
… maybe tweak the algorithm to have these particular “words of wisdom” run only on April 1?
Too bad there isn’t an actual board game or video game that incorporates a bunch of bogglish ideas. Allows rare chance for stock picking or whatever to win. Maybe Jim coukd mske a WCI edition.
This is quite possibly the worst article I’ve ever read on WCI. It will almost certainly harm more people than it helps and WCI could have used a solid article on this topic. It was so bad that Jim had to write an addendum to minimize the damage.
There seems to be some reservation about committing to the concept that this game is terrible for people since teaching students to invest is probably better than not teaching them anything. Perhaps another viable argument is that the excitement of the game gets them interested in investing.
One problem is that quality investing should be boring. It’s like watching paint dry. Teaching students that it should be exciting is a recipe for disaster. Another is that they encourage stock picking.
Take a look at the list of organizations funding The Stock Market Game: The Stock Market Game
They are mostly financial institutions that have an incentive to get your money from day trading (Don’t forget about that ask/buy spread). Shamefully Vanguard is even on that list….
90% of investing is done by institutional investors. That means 90% of the time the trading partner on the other side of your trade is an institutional investor with way more knowledge and resources than you. Even professionals fail to beat the market. Check out the SPIVA report on this stuff guys. Even professionals suck at stock picking. You think you can do it? You know their odds of beating the stock market over a 40-year period? It’s worse than 1% (No, not a typo). SPIVA: https://www.ifa.com/articles/despite_brief_reprieve_2018_spiva_report_reveals_active_funds_fail_dent_indexing_lead_-_works
With all the evidence indicating The Stock Market Game is a poor teaching tool it is nothing short of a colossal abomination that, not only is a healthcare professional who garners wages utilizing evidence-based practice willing to write this misleading article, but that WCI is willing to publish it even with an addendum.
No doubt it’s a crappy game but unfortunately you do have to start some place. Trying to start off with you can’t beat the market as a teaching point is impossible for young ones. Heck you can’t get most adults to realize how unlikely it is. I dont recommend crawling but it’s sort of a necessity before trying to run a marathon and that’s what investing is a marathon.
The message doesn’t just have to be that you can’t beat the market. It can be that you don’t have to. Once people understand the magic of compounding they are remarkably impressed by it. My other qualm with the article is that you can’t extrapolate anything over such a short time period.
That’s funny bc that’s even a harder message for a kid. Look no doubt the game sucks for really learning but as something simple to initially understand what a stock can do, it’s fine for young ones. Absolutely I wish there was a clever game that actually reinforced good rules. Great if included all kinds of things like options, tilting, insurance etc. A good diet is important since that health effect compounds over decades too but it ain’t so easy to get Americans to do it and that isn’t counterintuitive like the pros can’t win most of the time.
Nah man. Haven’t you ever heard of the lily pad math problem? https://brainquake.medium.com/the-lesson-of-the-lily-pond-c86d5f9d7ae
That problem is to teach kids about compounding. They can get this stuff if taught in a fun engaging way. This can be done without teaching bad habits along with it.
That’s not the same thing but it doesn’t matter. I look forward to your successful board or electronic game. Please post when it goes on sale.
There is no need. It’s already been done. See below.
Oh be nice…This isn’t nearly the worst article ever on WCI. There were many that were far worse. 😉
I actually like this post but it would be good if the game would have been tweaked a little IMO.
You know what makes it the worst? It’s because of compounding. They are teaching all the wrong things at such a young age and the would-be compounding that could have initiated at such a young age is squandered to a large extent. That makes this lesson exponentially worse, especially if the kid has a Roth IRA at a young age. Even then they are likely to take these poor lessons into early adulthood. I’m not buying the, “It’s better than not teaching them anything about investing argument.” There have to be engaging ways to teach this stuff well without jeopardizing their futures with poor long-term investment strategies. I remember Alan Roth citing the Stock Market Game as a poor learning tool in “How a Second Grader Beats Wall Street. Ever since, it’s been on my radar.
See my post above for how I would have changed the game. I agree that they need to learn the effects of compounding and I would have had a 5th “family member” buy a basket of index funds with a grand and watch them over the next 5 years.
But losing teaches lessons too. Some people learn best from reading about the mistakes of others. But some of us learn better from touching the hot stove ourselves and gaining real life experience.
We disagree that this is the worst article ever. There are far worse. I give kudos to the author for experimentation even if I think he could change his experiment the next time around.
I agree that your version of the game would be a substantial improvement. Since students don’t have 5 years (Why not 10 to be safe?) to let this play out, it doesn’t work in a classroom setting, where it is typically used. A game accelerating time, comparing investments to an index fund’s performance, and displaying fees would be best. If kids get to play games, even investment games, rather than learning in a more traditional lecture format, they will pay attention.
Cashflow would have been an amazing game if it didn’t deal with individual stocks and taking huge risks to get out of the “rat race.” It’s still really good for learning about cashflow and budgeting. There is a huge opening out there for a better literature-based investment game.
Worse than the colored diamonds post huh? That’s saying something.
You can’t include the blue diamond post because I haven’t read it (I will now though.). This issue is particularly irksome to me because it has to do with targeting children. The Stock Market Game reminds me of the tobacco industry promoting candy cigarettes for children.
Seems a little overblown. Stock market game = cigarettes. Really?
Cigarette candies, not cigarettes directly. I’m drawing an analogy to the tobacco industry’s lack of regard for the wellbeing of young potential customers for financial gain to the financial industry’s lack of regard for the wellbeing of young potential customers for financial gain.
Just check out the list of industries who donate for The Stock Market Game:
https://www.stockmarketgame.org/supporters.html
The big difference I see is buying cigarettes and treating cigarette related illness probably costs less….
They want money Jim and the analogy holds up fine.
(Don’t get me wrong. I acknowledge the whole illness/death thing from cigarettes but I’m sure you get the analogy)
Since the financial industry sponsors the stock market game, I’m drawing an analogy to the tobacco industry’s lack of regard for the wellbeing of young potential customers for financial gain to the financial industry’s lack of regard for the wellbeing of young potential customers for financial gain.
I guess when I think of “the stock market game” I don’t think of a specific product/brand sponsored by a particular entity, but I’m not surprised that brokerages would try to promote this sort of thing.
Well, you should think of it that way. Alan Roth certainly did in “How a Second Grader Beats Wall Street.” It’s cigarette candy…
Great idea and I think I’ll do something similar with my kids.
Just for the record, your chart doesn’t reflect the 3:1 split in TSLA in August 2022. It had a bad 2022, but not quite that bad.
Of note, TSLA underwent a 3-for-1 stock split during this timeframe, so the final stock price of $133 is equivalent to $400 (still dramatically down, but important context).
TSLA has since risen to >$250 (approaching $800 pre-split).
I think some people are missing the point. This is not the final lesson on educating children about finances. This is a fun game to introduce concepts about how the market works. When my kids are older, I will gladly show them my boring portfolio that consists of 90% SCHB and 5% SCHG. They will see how it dramatically beat most if not all individual stock offerings that are in my accounts as it has been doing ever since i opened it. That is where the real lesson will hit, but a stock game over 20 years doesn’t really work well does it?
I have zero debt and a solid nest egg where i could be considered coast fire if that really exists. My children will lean on our everyday discussions about debt, interest, leverage, and taxes, etc. The important thing is to get the discussion going, and that it’s not taboo. We are constantly trying to teach solid financial health.
I put the stock game akin to taking a luxurious Hawaiian vacation (not the real world, but a fun aspect of life that can be savored for a moment).
In the world discussed on the posts above, that vacation would be considered detrimental to my children’s development. However, most high earners that do well on the saving and spending aspects will take that vacation anyway.
I hope you get a chance and take that vacation too. It’s worth it.
There are many lessons to be learned in investing. This is one of them. I appreciate the post.
Bravo for putting the effort towards educating and engaging the family. You have done more than most. As many have mentioned, there is no single perfect teaching tool for kids. The NGPF, mentioned above, is one of the better resources I have used with my kids. It has many games that last ~ 20 minutes. Each has a lesson in mind, some loftier than others. Our house fav used to be “Build Your $TAX” https://buildyourstax.com/ . It gives the child various investment vehicles starting with savings accounts, CD, Gov Bonds and then works its way to Index funds, individual stocks and even commodities and precious metal trading. The game is simulated over 20 years (in 20 minutes) using real US market data to show the child the impact of different investment options. Your goal is to beat the computer’s investment choices in those 20 minutes. Again, this is just one tool.
Lively discussion about The Stock Market Game 🙂 This game may best be termed Stock Market Trading game. This game does a reasonable simulation for kids on trading stocks in the global capital markets basing the actions on news, financial reports and other elements that influence the market. This is knowledge that most US citizens will never have. Provided parents/teachers accentuate the lessons (this is how you trade) and impart the wisdom that trading is just one part of investing, I see nothing wrong with the SMG. As declared on the SMG site, the game is the product of SIFMA – an organization that represents nearly all U.S. brokers-dealers as well as asset managers. So, no surprise that the goal of the game (and legitimately) is to teach people how to be comfortable with trading tools. Not how to invest long-term.
BTW, SMG has an upgraded new version parents may want to check out called SMG Invest Quest https://smgiq.org/ This version is trying to address the long-term lessons. It is a quarterly investment simulation of investment of $100,000 over 5 years using market data. Another good tool. One big item missing – dividends.
Aside from criticizing “The Stock Market Game” in “How a Second Grader Beats Wall Street” Allan Roth wrote an article on “The Stock Market Game” in 2018. https://www.advisorperspectives.com/articles/2018/06/25/the-real-losers-in-the-stock-market-game
At the end of the article Alan suggests people head to https://www.ngpf.org/ instead. Interestingly, in the first comment above, another well-known finance educator/writer, Paul Merriman, directed everyone away from “The Stock Market Game” and towards the very same educational website as an alternative. I think we should take the hint…
Check out the Arcade section of https://www.ngpf.org/ and you’ll find many finance games, including $tax (“See the consequences of 20 years of investing decisions in just 20 minutes.”), that I’m sure will be engaging and will lead to better financial habits for your kids.