This is a guest post from Jericho Hill (a.k.a. Stephen), Get Rich Slowly forum administrator and resident economist.

I recently attended a focus group at The Motley Fool, a website about financial education. After the focus group, I had a few moments to talk with David Gardner, one of the site’s founders.

I asked David if he’d be willing to sit down for a few minutes for Get Rich Slowly. He was happy to chat, and the following Friday we sat outside a Starbucks coffee house in Alexandria, Virginia for about ninety minutes.

The first part of our interview focused on lessons learned while teaching children about personal finance, especially about investing.

Stephen
What do you tell sixth-graders about stocks, about investing?

David
I give the basic talk about compounding returns. And, of course, I talk about understanding the stocks that you would buy, or pick. Then we actually apply this using CAPS. [CAPS is The Motley Fool's stock "aggregator" mentioned here.] Every sixth-grader is part of a three kid team. There are eleven teams, and they all compete against each other. We use CAPS as the platform, and they pick stocks to outperform [the market index]. And then they’re scored.

Stephen
I remember playing the Stock Market Game in high school. It was about how to pick stocks in ten weeks. I got familiar with stock sheets but learned nothing about investing.

David
Probably you were picking up other things. Stuff like companies that sell products and services, that you learned that you could own stock in, have ownership of, which is one of those basic lessons, a valuable lesson.

The stock market is like a farmer’s market, except that instead of buying fruits and vegetables in a basket, you’re buying portions of public companies, and not just on Saturday morning but five days a week. That’s what we tell the children.

Stephen
The short-term conditions that Stock Market Games have in high school are a little silly. It should be more educational than it usually is. Usually, kids are given fake dollars and they allocate them to one crazy purchase, and it’s usually a dodgy enterprise that doubles by luck to determine the winner.

David
[The game I teach,] in contrast to other stock market games — which are kind of a plug-in unit in a social studies class — this game lasts through the sixth, seventh, and eighth grades in their math courses. Usually [stock market games] are two months and about finding some crazy way to win. But our game is about letting your stocks run for three years to see what happens. Some children are really into it, and they can check their scorecard many times a day. Nine of the eleven teams are beating the market since we started this in January.

Stephen
So, how do sixth graders pick stocks? How do they go about picking them, even with a resource like CAPS, and what stock are they picking?

David
There are two primary ways. We’re all about buying what you know. As you know, with Iron Man out, it really drove Marvel [MVL], a stock you can buy. Or Under Armour [UA], which is just now moving into sneakers. So there are triggers that they’re aware of, that they find interesting, so those things are great. The second way they pick stocks is with their parents.

Triggers like that are great, but you want to buy into a company that will still be in business ten years from now, and will have some form of sustainable, competitive advantage.

Stephen
You feel that currently we’re not teaching our kids what they need to know financially, something that historically hasn’t been part of the educational criteria. What is your approach to teaching personal finance in the school, and is that the appropriate place?

David
Foolanthropy, the Motley Fool charity arm, [has] in the last twelve months made a commitment. We don’t want an 18-year-old not to know 5-10 basic things about personal finance. Now the question becomes, what’s the best, broad way to make that happen? We’ve tried to crack the public school system, written books, but we know now that parents are buying it — the kids do no naturally demand it. The best way to reach kids, so far, has been through parents.

Stephen
The years that we need to most aware of good personal finance habits are the years that we most ignore them. We don’t know the value of compounding when we’re young. I don’t know if we can do this in the public schools, but it’s one of the most visible starting points. There have been some attempts, like teaching mathematics through fantasy sports, making it more relatable through a different medium.

David
That’s why the math program here asks me in, to make math more applicable and fun.

Stephen
This course is just here in Alexandria?

David
Yes. It’s a personal effort, and shines a light as to where we might be heading, using CAPS as the platform, for a much longer running stock market game for children that’s more practically relevant.

J.D.’s note: Personal finance education is a hot issue. We all agree that more needs to be done to help our youth become better equipped to handle money, but nobody’s sure the best course to take. (There are some great organizations, like the Jump$tart Coalition for Financial Literacy, working on this problem.) What sort of personal finance education did you have? Was it helpful? Would you have profited from a game like the one David Gardner teaches to the kids of Alexandria?

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