double as teaching tools
Youth is served with targeted marketing from banks, funds and brokers
By Adriane G. Berg
Investment houses have turned their
promotional machines toward children. From
Stein Roes Young Investor Fund to Disneys child-oriented stock reports, youth
is served with targeted marketing from banks, funds and brokers.
IT MAKES SENSE, given that parents have become immune to the myriad sales pitches from
investment houses and mutual fund companies. But parents tend to think kindly toward
anyone or anything that helps teach their kids values that theyll need
later as adults. Besides, todays second-grader is tomorrows consumer. The hope
of banks and mutual funds is that brand loyalty starts with an interactive Web site and
ends with pension fund deposits.
The difficulty is to find investments that offer both teaching and investment tools. There
are plenty of Web sites that offer great learning vehicles for children and there are
thousands of investments (more than 8,000 of them just in mutual funds) that are solid
financial choices, but sadly, only a handful have merged the two concepts.
First off, financial marketers must contend with a level of ignorance that should come as
no surprise. A nationwide study of 12th graders conducted in 1997
by the Jump Start Coalition for Personal Finance Literacy revealed that in a series of
elementary-level questions, only 57 percent of the questions were answered correctly. When
asked what the best return on investments had been over
the past 18 years, only 15 percent said stocks; the rest opted for U.S government bonds or
Despite the problems, several investment groups have begun making solid efforts in this
area. Below are some of the best that combine teaching investment and savings
techniques with the option to put your cash to work.
BANKS AND S&LS
Banks and savings and loans make up the biggest group and one with the most history
in this effort. For years, S&Ls were known as places where children could
drop off their allowances in return for savings rates of 2 percent to 5 percent, depending
on the era.
Even with rates today of less than 2 percent annually, financial institutions still have a
big advantage because theyre physically in the neighborhoods and schools.
Neighborhood programs like innovative talks, skits, plays, concerts and carnivals
with money themes do work with younger kids. Older children need good old-fashioned
service and superior financial deals.
Ted Turner understood this in endowing the Young
Americans Bank in Denver. Kids get a savings account, the right to borrow, a
monthly newsletter and a real checkbook. They learn all the banking skills and how they
interrelate. And they must leave the bank at age 21.
But savings and checking accounts wont pay for colleges that cost more than $20,000
a year. Thats why mutual fund companies have moved in to fill the void. The Mutual
Fund Education Alliance lists at least 40 funds aimed at children. That number undoubtedly
will grow even higher with the new Education IRA that lets parents or others set aside up
to $500 a year for a childs college education. Of the ones that already cater to
children, the mutual fund companies have positioned these funds to accept lower minimums,
target long-term growth and presumably design a
kid-friendly outreach program.
But most burgeoning Web sites simply translate the printed page to a screen. Any games
offered are mostly financial vocabulary crosswords, memory games or columns presented in
question-and-answer formats. Kid-to-kid newsgroups could work, but those who already show
an interest in finance usually gravitate to adult sites.
Of the mutual fund sites, perhaps the best-known and best-organized to date is by Stein
Roe, which has been pitching to children and parents for years through its Young Investor
program. Stein Roes Young
Investor Fund (SRYIX) holds growth stocks in brand-name companies familiar to
children, such as Coca-Cola (KO) and Mattel (MAT), and some they may not recognize but
their parents will, such as Cisco Systems (CSCO) and Microsoft (MSFT).
Young Investor combines interactive games, calculators and editorial columns to teach
children about investment strategies. And it doesnt forget whos probably
watching in the background. It includes an area called parent to parent, in
which it surveys parents on investment-related issues. For parents or children who invest
in the Young Investor Fund, Stein Roe also sends snappy written materials with its
statements to share with the kids. Still, parents may not be overly impressed if they
compare Stein Roe with benchmarks like the Standard & Poors 500 (INX), which has
outperformed the fund in the past year. The fund has fared better over longer periods,
essentially matching the index over a five-year period.
Brokerage firms have discovered the youth angle as well, evidenced by Smith Barneys Young Investors Network. The site
focuses primarily on education; it allows children to create a cyber portfolio
of stocks that they can track and see how theyve fared, and includes savings and
investment calculators to show how interest and stock appreciation works.
Commendably, Smith Barney doesnt push children at every turn toward making
investments through its brokerage house. Instead, it walks users through a series of
learning exercises and then suggests that if the kids want to make an investment, they
should have their parents contact a Smith Barney broker. (Well assume the parents
understand that they can substitute any broker in this equation.)
But as with many child-oriented Web sites, it may have a hard time keeping a
childs interest. Who decided it would be cool to show archaic etchings of Mr. Smith
and Mr. Barney wearing starched collars, party hats and beanies?
Similarly, Merrill Lynch now offers its Family
Savings Center, which allows children to subscribe to the Savin' Dave
comic book, as well as offering potential lesson plans for teachers. The activity sheets
help teach about saving and investing, but they arent intended as Web tools.
Instead, users are invited to print the worksheets and answer a series of questions.
CIBC has taken its Guaranteed Investment Contracts (GICs), which usually are part of
conservative pension plans, together with some mutual funds and a savings account and
dubbed them the Youth Investment Portfolio. With it, you get CIBCs Smart Start Program, specifically
designed to educate your kids about money.
Corporations also have hopped on the marketing bandwagon, but the companies or
stocks that have made the biggest efforts are the ones you would expect.
Walt Disney (DIS) recently won Liberty Financials coolest annual report contest,
which was intended to provoke companies into creating reports that catered more
to children. PepsiCo (PEP) had the coolest cover, according to Liberty, with the
reports depiction of a Cats Eye Nebula from the Hubble telescope.
Last summer, Coca-Cola contemplated a partnership with McDonalds (MCD) to create
giveaways relating to personal finance. Its questionable, however, as to whether a
book on money no matter how colorful can compete with the plastic trinkets
found in a Happy Meal.
Others like Mattel and Hasbro (HAS) offer interesting perquisites and insights to their
latest toys, but many analysts have soured on toy manufacturers in recent years as the
number of children under the age of 10 begins to decrease. Similarly, Toys R
Us (TOY) is a natural for children, but the stock trades at less than what it sold for
five years ago.
Each of these companies allows individuals to invest directly through direct stock
purchase plans, which typically require people to invest $50 to $100 a month for
additional shares after the initial investment. Its a great way to teach dollar-cost
averaging, but as a parent youll need to ask yourself: Is this really how I
want to invest my (or my childs) money?
For those who want to save commissions, you can buy stocks directly form the
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