Teaching How to Save, Invest at a Tender Age

A.G. Edwards has identified a generation of responsible savers, and the St. Louis-based investment company is making a concerted effort to encourage them.

The company’s tactics may seem a little unconventional, though: indirectly providing trinkets for them to “purchase” and fake checkbooks to record the phantom cost.

But that’s the sort of serious swag that can inspire an 8-year-old to make financially responsible decisions.

“About half of the kids picked saving for college for their long-term savings goal -- at 8 years old,” Justin Goia, an A.G. Edwards spokesman, said of interviews with kids involved in a program aimed at teaching third-graders to save and invest. “What it told us was that kids this age had the capacity, intelligence and desire to make thoughtful decisions about their future.”

A.G. Edwards recently laid out $425,000 to fund what it’s calling Nest Egg Knowledge for Kids. The program, which has 17 children’s museums nationwide working with local schools, is just one of dozens of efforts around the country aimed at teaching the underage set how to handle finance.

Citibank, for example, offers interactive games on the Internet for kids as young as 4 years old. It’s also the sponsor of Do Something, a national youth group that’s challenging kids to take charge of their spending habits.

The Allstate Foundation, an offshoot of the giant insurance company, gave Junior Achievement $1.5 million to create economic education programs for teens. A host of investment companies and investment trade groups sponsor stock market games at high schools that simulate investing with a hypothetical portfolio.

Even Treasury Secretary John W. Snow spent a portion of last month touring elementary and high school classes as part of Teach Children to Save Day.

Citing the negative 2005 savings rate Snow said, “We must work to satisfy the natural desire of young people to learn now and reduce this problem for the next generation.”

Of course, efforts to educate kids about money aren’t brand-new. A group called Jump$tart has spent the last decade trying to get state legislatures to add personal finance classes to the high school curriculum.

What’s surprising, however, is how young the target audience has become. This new effort by A.G. Edwards, for example, is aimed at a group who may be too young to even have an allowance. Still, the company thinks it can get third-graders to work through a budget -- a concept that flummoxes many 40-year-olds -- and teach them to save for long-term goals.

Goia maintains that money skills are best taught at a tender age. “This is when you teach kids concepts like brushing their teeth and eating their fruits and vegetables,” he said. “That way you establish healthy habits that you’ll maintain later in life.”

It’s hard to know whether the concepts will stick.

Beth Fitzgerald, president of a St. Louis children’s museum called the Magic House, launched one of the first programs for young kids eight years ago. The program, called Money Doesn’t Grow on Trees, is now part of the math and social studies curriculum in many of the local public schools.

The money lessons start at school, where children are told about various careers and invited to apply for jobs. Their teachers serve as interviewers and eventually “hire” a staff of 8-year-old mail carriers, television producers, shop clerks and the like. The kids then go to the Magic House, where they walk into their own town -- Children’s Village -- and are put to work, making loans at the bank and meals at the pizzeria and stocking shelves at the supermarket.

At the end of their workday, they’re sent home with a paycheck and are charged with setting up a budget, encompassing housing, transportation, food, clothing, vacations and savings.

Just as in real life, the budget is all about choices. Do you want to live in an apartment, a house or a mansion? Dollars are allocated based on that decision. Now, do you take the bus to work, drive a used car or buy new? More money goes out the door.

The kids who pick the mansion and the new car are quickly faced with the hard, cold reality that they’ve spent too much to take a vacation at Walt Disney World. But unlike real life, these kids can’t go into debt. If they spend more than they make, they go back and revise their choices.

“It shows that sometimes you have to make sacrifices to get something that you want,” Fitzgerald said.

The museum has had a tremendously positive response from teachers, students and parents alike, but Fitzgerald said Magic House had never tracked former pupils to see whether they continued to make smart money choices later in life.

Pasadena’s Kidspace museum, also a recipient of an A.G. Edwards grant, will incorporate money management into an existing program called the Nature Exchange.

There, kids will be able to earn Nature Exchange currency through good attendance at school, the idea being that going to school is an 8-year-old’s job. And they’ll be able to buy items such as polished rocks and shark teeth with the money they earn.

The children will get their own checkbooks to record their income and purchases. A Kidspace representative, called a financial advisor, will visit their classrooms as part of the exercise to check their math and talk about their long-term goals.

“It’s earning, saving and budgeting, money management, short-term and long-term goals,” said Stephen H. Baumann, executive director of the museum. “You can buy something now or save up for something larger later.”

Nature Exchange is already one of the most popular programs at Kidspace, he added. But will it make tomorrow’s generation of graduates better savers and investors? Baumann can’t say.

“The critical part for us is that it’s fun.”

Kathy M. Kristof, author of “Investing 101” and “Taming the Tuition Tiger,” welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof @latimes.com. For previous columns, visit latimes.com/kristof.