Volunteering with Junior Achievement

Investing 101 

I volunteer with Junior Achievement.  Once a week, I go into a classroom at Humble (Texas) High School, and talk to some seniors about business.  I love doing this, because some of these kids are like sponges, soaking up perspectives on a world they barely know (there are also those who just want the change of pace).  One of the activities I have with them is a game, where we see who can do the best at investing over the school term.  There’s usually a prize of some kind to make things interesting. 

Two Types of Investments 

Before we play the game, though, I have to tell them what investing means.  Not surprisingly, most of them don’t know much about it.  What I tell them is that I know of only two types of investments:

1. The first is where I lend money to someone else, and they pay it back with interest. 
2. The second is where I buy a piece of something.

The lending of money to someone else is what happens with a savings account, a certificate of deposit (CD), a money market fund, a treasury bill, bond, or note, a corporate bond; even some more exotic investments.  If you lend money to someone, you expect it to be paid back, with some amount of interest that both you and the borrower agree to. 

By contrast, when you buy a piece of something, you aren’t expecting to get paid back in the same sense.  You expect that whatever you bought will:

1. create some income;
2. be more valuable when you want to sell it; or
3. both. 

If you buy stock in a company, you want it to:

(a) pay a dividend;

(b) go up in price; or

(c) both. 

If you buy someone’s dollhouse store, you hope:

(a) it will make a profit;

(b) you’ll eventually be able to sell it for more than you paid for it; or

(c) both.

Which Road Do I Take?

So, when they’re deciding what to invest in, they have to decide whether they want to go the safe route, and earn interest; or, take the riskier route, and earn a piece of the action.  Most of them go the ownership route, since it’s not their money, and it’s more fun to follow.  But there are a few who want to go with something safe, but dull, and invest in a CD or something similar.  I expect that these latter students will go that direction as they get older, too.

So far, every class where I’ve done this has made money over the term of the class.  It will be interesting to see, in today’s market, whether that will hold true this year.

I volunteer with Junior Achievement. Once a week, I go into a classroom at Humble (Texas) High School, and talk to some seniors about business.