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Tuesday, September 11, 2007

6th Graders Take On Wall St. - Financial Literacy in Chicago School

Time reports. on an innovative program teaching urban students financial literacy in Chicago.
... Ariel Community Academy is unusual. Its 420 students, nearly all black and about 81% from low-income families, are testing an intriguing proposition: Can teaching urban black kids finance and economics help some of them escape poverty — and shake African American skepticism about Wall Street?

Despite the growth of the black middle class, the percentage of affluent blacks investing in the stock market is actually falling, while such investment by their white peers remains steady. That's partly because blacks have historically relied on real estate as a primary wealth builder. Plus, blacks save far less than whites for retirement. That's why John W. Rogers Jr., CEO of the company that backs the academy, says, "The issue of financial literacy in our schools will hopefully avert a crisis."

The experiment began in the early 1990s. A young Chicago executive named Arne Duncan, then running the foundation of the investment firm Ariel Capital Management, rallied a group of business and education leaders to create a public school whose students could compete with kids from any elite private school. Many deemed public education hopeless. By the mid-1990s, Chicago's mayor seized control of his city's failing schools. So the idea of creating a predominately black school with an emphasis on finance and economics — in one of the city's most bullet-pocked neighborhoods — was viewed by some as preposterous.

Each first-grade class is given $20,000, initially managed by Ariel Capital Management and Nuveen Investments. Starting in sixth grade, students join a "junior board" that invests that money. In recent years, students bought stock in companies like Adidas, Tiffany and Disney. After eighth-grade graduation, the seed money is cycled to the incoming first-grade class. Profit is split: half goes to a school improvement fund, the rest is divided among students. They choose between investing their share in a college savings program or receiving a check.

Earlier this year, Victoria, the eigth-grader, heard buzz about Apple’s iPhone, then lobbied the junior board to buy the company’s stock – just before its priced reached the $90s. “We caught Apple at the right time,” the honey-toned girl says, sitting in the school’s boardroom.

Nearby, Myles Gage, a 13-year-old eighth-grader, flipped through annual reports of Toyota and Smucker — companies in which the junior board has invested. When it picked Google, the stock was hitting $400. "It was worth paying for," he says. Now, the aspiring investment banker says he follows Google's performance (its stock is now over $500) on Yahoo finance and CNBC.

Ariel's school day starts earlier, and ends later, than most public schools. Some students voluntarily show up for Saturday morning tutoring. Ariel's foundation picks up much of the tab for extra teaching staff. It also pays for security, even ties for the boys, which are required for sixth, seventh and eighth graders. "It sets the tone for success," says Matthew Yale, 29, the head of Ariel's foundation.

It’s rare for elementary schools to teach economics or finance. Just seven states have made taking a personal finance course a high school graduation requirement, and only 17 have made economics a high school requirement, according to the National Council on Economic Education, a New York advocacy group. Conventional wisdom holds that black youth in many urban public schools aren't academically competitive with their white peers, especially in math. Ariel punctures those assumptions: Last year, 88% of Ariel's students met or exceeded Illinois' math standards, compared to 67% of Chicago public students overall. Ariel's students are being recruited by top private schools. Parents are having frank conversations with their children about finance — even asking them for investment advice.

Teaching financial literacy to youth works! It can break the cycle of poverty and change the destiny for generations. Please continue to pray for NCUD as we work to bring quality financial literacy education to our city.

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