Sources:
National Endowment
for Financial Education
High School Financial
Planning Program; University
of Western Ontario’s
Stock Market Challenge;
State
Farm’s Common
Cent$ site; and
Jump$tart Coalition
Suggested Target
Age: Grades
6-12
Topics Covered:
Investment
options, investment
risk and return rate,
liquidity,
Time Required:
45 minutes
What Will the
Students Learn?
- 10 different types
of investment options
- The definitions
of “risk”
and “rate of
return,” and
their relationship
to particular investment
options
- The definition
of “liquidity,”
and how it relates
with particular investment
options
- The definition of
“diversification”
and why it is important
to diversify one’s
investments
State Contents
Standards Key
Virginia:
Civics and Economics:
CE.10; Economics and
Financial Literacy:
Objectives 1, 14.
Indiana:
Economics: E.1.11;
Florida:
Social Studies: SS.D.1.4
Mathematics: M.A.A.
3.3
California:
none identified
NOTE: This lesson
does not require computers
or Internet access.
Materials Needed:
NOTE: Instructors for
this lesson should study
the Investment Options
Chart and get familiar
and comfortable with
the language and concepts
on it. If this information
is very unfamiliar,
it may be a good idea
to invite a guest speaker
from a bank or investment
firm in to teach this
particular lesson.
- In this lesson,
you will be leading
the class in playing
different games that
help them think and
learn about investing.
For the Introductory
activity, you will
divide the class into
four teams and play
The Millionaire
Game. For this
game you will need:
- During this lesson
you will also divide
the class into two
teams to play the
Investment Options
Concentration Game.
To prepare for that:
- Download, print
out, and study
the “Investment
Options Chart.” Write
the name of each
investment option
(in the left column
of the chart)
on separate sheets
of blank paper
in large letters.
Write each description
(in the right
column of the
chart) on separate
sheets of blank
paper.
- Create an oversized
“Concentration
Game Board.”
On the blackboard
or the wall, tape
all the sheets
with the names
of the investment
options on one
side in rows of
three. (You can
print out the
pre-typed sheets
from the file,
Investment
Options Sheets
for Concentration
Game.) Tape
all the descriptions
on the other side
in rows of three.(You
can print out
the pre-typed
sheets from the
file, Investment
Options Descriptions
for Concentration
Game.) At
the top of the
options side,
write “Investment
Options”
and at the top
of the descriptions
side, write “Descriptions.”
Note:
Hang the sheets
upside down and
face-down with
one piece of tape
at the top. This
way, when the
sheets are flipped
up, the writing
will be displayed
right-side up.
Click
here for a diagram
of how the “game
board” on
the wall should
look when you
are done.
- Write the definitions
of rate
of return,
risk,
and liquidity
(see below for
the definitions)
on the blackboard,
whiteboard, or
some other prominent
place in the classroom.
Lesson Plan:
- Introductory Activity:
As an opener, play
The Millionaire Game.
- Divide the
class into 4 teams.
Have each team
appoint a spokesperson.
Give each team’s
spokesperson a
“Millionaire
Sheet.”
- Explain that
you will be reading
a question aloud
about facts and
myths of millionaires.
All the questions
are true/false.
The first team’s
spokesperson that
raises his/her
hand will get
to try to answer
the question.
If the team’s
spokesperson gives
the correct answer,
that team receives
five points. If
the person gives
the wrong answer,
the team will
lose two points.
If team members
feel especially
confident that
they know the
answer to a question,
then the spokesperson
should raise his/her
hand AND hold
up the Millionaire
Sheet. Now if
the spokesperson
gives the correct
answer, the team
will receive 10
points. However,
if the answer
given is incorrect,
then that team
will lose 10 points.
- As instructor,
keep score of
each team’s
accumulated points.
After you read
all 15 questions,
total up each
team’s score.
The team with
the most points
wins.
- Following the game,
explain to the class
that today’s
lesson, and next week’s,
will focus on investing.
One way to think about
“investing”
is to think of it
as “using your
money to make more
money.” Ask
them what they’ve
already learned in
the Economis program
about using their
money to make more
money. (Based
on the lessons they’ve
been through previously
in the curriculum,
they should be able
at least to tell you
about earning interest
in a savings account
and about CDs. Some
smart kids in the
class may also mention
stocks and bonds as
investment options.)
Also ask them whether
their parents or other
adult relatives or
friends invest in
the stock market.
If so, do they know
what some of those
investments are? (For
example, a student
may say that his mom
has a mutual fund
or that an uncle owns
shares of Exxon Corporation.)
Now ask them what
they personally think
about investing in
the stock market.
Is this something
they plan to do when
they are adults? Are
they nervous at all
about “playing
the stock market?”
- Once you’ve
held this class discussion
for a few minutes,
explain that today
they will be learning
about some common
types of investment
options.
- Pass out copies
to each student of
these two handouts:
“Investment
Options Chart”
and the “Investment
Risk Pyramid.”
If you have not already
written the definitions
of risk,
return rate,
and liquidity
on the board, then
do so now (definitions
below):
- Rate of
Return
– how
fast your money
grows. Sometimes
investors use “interest
rate” as a
synonym for rate
of return.
- Risk
- the degree
of uncertainty about
the expected return
from an investment,
including the possibility
that some or all
of the investment
may be lost.
- Liquidity
- the ease with
which an investment
can be turned into
cash, without a
significant loss
of value.
- Now explain that
investment options
are typically judged
by three critical
characteristics: risk,
return rate, liquidity.
Call on students to
read the definitions
of each term out loud.
Then provide some
examples of each term
to ensure that they
comprehend these concepts.
For example, the phrase
“double your
money” is talking
about a “rate
of return.”
It is a claim that
your rate of return
will be 100% -- if
you invest $100 in
the particular investment,
you will earn another
$100. (That is a very
unusual rate of return,
and generally people
should be suspicious
of anyone promising
such a high rate of
return!) To highlight
the concept of “risk,”
you might talk about
two different companies
– say, Starbucks
and a new start-up
business that claims
it has produced a
product to rival the
ever-popular iPod.
Let’s say you
have some money you
want to invest and
you think you will
buy stock in either
Starbucks or the new
start-up company.
Which company is a
riskier investment?
The answer is the
start-up company.
Starbucks is a known
brand name with a
popular product and
it’s a company
that’s been
in business for a
while. So it has proven
itself. By contrast,
who knows whether
the new start-up company
is going to succeed,
or if their promised
product will actually
be better than the
iPod? On the other
hand, if the new company
really does produce
an iPod-like product
that is really high
quality and costs
less than the iPod,
then that company
might end up doing
really, really well
and its stock price
might soar.
- Tell them that
in the scenario you
have just described,
we see something that
investors call the
“risk to return
relationship:”
The more risk you
take with your money,
the greater the potential
return you receive;
the less risk you
take, the less potential
for return you receive.
A person who takes
the high risk of investing
in the start-up company
may lose all her money
if the company goes
down the tubes. But
if the company does
well, she may obtain
a significant financial
gain.
- Now explain the
concept of “liquidity”
by contrasting a savings
account with a CD.
Liquidity is about
how quickly and easily
you can have access
to the money you invested.
A savings account
has more liquidity
than a CD because
with a savings account,
you can get your money
out whenever you want,
but with a CD, you
have to wait until
the maturation term
is over before you
can get the money.
(Actually, you
can get the money
out from a CD before
it matures, but if
you do, you will pay
a fee.)
- Now give the students
some time to study
the handout called
Investment Options
Chart. Some of the
language/vocabulary
on the chart may be
unfamiliar to the
students, so be prepared
to give some explanations
and examples.
- Write “diversification”
on the board. Define
it for the students:
- Diversification
– the
reduction of investment
risk by spreading
your invested
dollars among
several different
investments.
Diversification is
simply spreading your
money around among
different choices
– that way,
hopefully at least
some of your investments
will do well and you’ll
come out ahead even
if some of your investments
perform poorly.
- To help reinforce
these concepts, you
will now close out
the lesson by leading
the class in playing
the Investment
Options Concentration
Game, using the
oversized “game
board” you have
already created and
hung on the wall.
- Split the students
into two teams, and
choose a team to go
first. One student
from each team will
take a turn, one at
a time. During his/her
turn, each team member
will be able to win
up to 4 points for
his/her team. Students
will earn points by
answering questions
correctly, and also
by being able to match
pairing sheets (as
in the card game,
Concentration).
- Have one student
from the first team
go up to the Concentration
“game board”
to select a sheet
from the “Investment
Options” side
and flip it up. Have
the student read aloud
the name of the Investment
Option. Then that
student should select
a sheet from the “Descriptions”
side of the “game
board” and flip
it up. (He/she is
trying to select the
sheet that “pairs”
or “matches”
with the investment
option just selected.
In the early stage
of the game, such
a choice will be pure
luck. In later stages,
as various investment
options and description
sheets are revealed,
a student with good
concentration may
be able to remember
where the matching
pairs are located
on the “game
board.”)
- Now the student
must decide if the
description is a match
for the particular
investment option
just selected. If
she is correct in
her answer (that is,
she says it’s
not a match when it
isn’t or says
it is a match when
it is), then the team
gets a point. Also,
if it is a matching
pair, the team will
get another point.
(Thus, there is a
possibility of getting
two points: one for
getting matches, and
one for being able
to identify the matches.)
If the student happens
to select a matching
pair, then she should
leave the Investment
Option sheet and the
Description sheet
face-up. If it was
not a matching pair,
she should put the
Description sheet
face down again.
- Now the same student,
still leaving the
Investment Option
sheet face-up (visible
to the class), will
consider once again
this particular investment
option and must identify
two further characteristics
of it:
- Where does this
investment option
fall on the Investment
Risk Pyramid –
it is a lowest,
low, moderate,
or high risk investment?
- How liquid is
this investment
option? Does it
have Low, Moderate,
or High liquidity?
(Note that
the answers to these
questions are found
on the Investment
Options Chart.)
For each of these
two questions that
the student gets
right, her team
will receive an
additional point.
Thus, at the end
of her turn, she
could have earned
up to four points
for her team. Regardless
of whether she gets
the questions right
or wrong, at the
end of her turn,
she should place
the Investment Option
sheet face-down.
(Unless she had
selected a matching
pair, in which case
the matching sheets
will both be left
face-up, as instructed
in step 11.)
- Now repeat this
process of steps 11-13
for the first team
member from the other
team. Again, this
individual has the
chance of earning
up to four points
for his/her team.
(The students
should catch on fairly
quickly that the best
way of being a good
team member is to
study the Investment
Options Chart, for
information on risk
and liquidity, and
to pay attention to
where the matching
pairs are “hidden”
in the game board.)
- Repeat this process
until everyone on
each team has had
a turn or until all
the matching pairs
have been identified
and turned face-up.
The team with the
most points wins.
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