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Investment clubs teach financial literacy: student investment clubs provide the rigor and risk to foster learning opportunities from financial literacy to preparing students to compete in today's global economy.

A study conducted by Money magazine in August 2006 found that students aren't as financially literate as they ought to be. The test scores of students enrolled in a personal finance class were not significantly different from students who did not take the class. Teachers are now being challenged to find alternative strategies to educate students in the ways of personal finance. One component of personal finance that is particularly challenging is investments. The student investment club provides a path from in-class learning theories to active learning with "real world" consequences.

The stock market simulation program has been used extensively within the business curriculum at high schools across the country. Research suggests that while it has provided a basic introduction to concepts related to the stock market, it lacks the rigor and risk factors which can foster tree learning. Student investment clubs provide the rigor and risk to foster learning opportunities from financial literacy to preparing students to compete in today's global economy. These learning opportunities take place through actual investments within the stock market. While setting up an investment club for students might first appear to be an overwhelming task, once an instructor has established a few basic guidelines and a structure that is compatible with her particular style of teaching, it is much easier than it looks. Getting written permission from the parents and/or guardians and a tax I.D. # are the first order of business. Once the instructor has obtained parental consent and the appropriate tax documentation, he is ready to begin.

According to a report in 2006, the first step when initiating a student investment club is to establish a set of rules and procedures. Developing a constitution is one of the most effective and efficient ways to establish these guidelines. It is also a great learning opportunity to further students' understanding of the democratic process. Students will have the responsibility of constructing a document that provides for a fair and equitable distribution of duties, as well as deciding upon a decision-making process tailored to the particular culture of the student population. Students will also have the opportunity to elect officers and learn parliamentary procedure.

The next step involves yet another learning strategy to enhance students' critical thinking skills, and increase their financial literacy within the banking industry. Since the club will need to open a bank account, it will be important for students to conduct research on the various types of banking institutions. This research will enable the students to critically analyze their options before making a final decision. Once the club has completed these steps, the next topic of discussion will be to determine how the club is funded. Research has shown that two of the most popular avenues to pursue for funding are member dues and fundraisers. Several clubs charge a membership fee along with monthly dues to raise the needed dollars to invest, while other clubs have initiated fundraising activities to fill their treasury. While both methods accomplish a club's ultimate goal, fundraising is another way to incorporate critical thinking and problem-solving skills; students have the opportunity to develop a comprehensive campaign strategy enabling them to accomplish this goal. Another method utilized by one particular club is to sell shares and create investment opportunities in which the purchaser of a share becomes a stockholder. While these investors do not have a say in the choice of stocks, they are able to share in the success of the investments made by the club. Effective verbal and written communication skills are vital because the students have to promote themselves as skilled investors. Quite an undertaking for a group of high school students! Once they master this particular skill then it becomes necessary to continue some form of communication to keep their stockholders reformed.

Teamwork, another skill vital for the 21st century workplace, is honed in the workings of the student investment club. By creating a document from which the students are able to conduct their business, and by creating a means to raise the necessary cash to invest in the stock market, students work as a unit to bring about favorable outcomes. Another way students have the opportunity to practice teamwork is through collaboration with other investment clubs--whether they are in the same locality or in different parts of the country. This type of collaboration opens the door for students to draw from a much broader source of knowledge and expertise. Field trips are a popular strategy utilized by investment clubs to conduct research prior to making a final decision on a particular stock. Investment clubs have found that students gain a better understanding of the financial worth of a company when given the chance to make a visit to the company. Students have also been able to attend annual stockholder meetings during the field trips as an added bonus. These resources provide valuable insight when conducting an analysis of whether a company is worthy of investment.

Now that the students have created an organizational structure, conducted extensive research, and analyzed the most effective use of their dollars, what happens next? A decision, through majority rule, must be made on how to invest and then distribute the earnings. Ideas from several investment clubs across the country have met with great success. With certain criteria in place, clubs have set up college funds from which each member is able to participate. Other investment clubs have distributed their earnings equally between the school and its members. This particular method of distribution would certainly give an added incentive for the schools to advocate and actively promote an investment club. The least popular idea was to distribute any income earned from the investments equally among its members.

Investment clubs can become an invaluable tool when educating students about financial literacy because they provide the rigor and risk necessary to ensure true learning. This program not only enhances financial literacy, it enables students to improve their problem solving and critical analysis skills, their verbal and written communication skills, and their teamwork and collaboration skills. These skills are vital to the future success of every student when they go out to seek employment within today's competitive global environment.

Sheri Cook is a graduate student at Ohio State University. She can be contacted at
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Author:Cook, Sheri
Geographic Code:1USA
Date:Oct 1, 2007
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