How to turn teen girls into financial prodigies

The first time you heard the title of the game show "Are You Smarter Than a Fifth Grader?," you probably paused for a second. Truth is, many of us just might not be able to hold our own against those whiz kids. Well, here's another question for you. Are you a better investor than a teenage girl?

If you're comparing yourself to the teenage girls participating in the ING-Girls Inc. Investment Challenge, you might be surprised by the caliber of the competition. Four of the teams started a little over two years ago have portfolios that are up on average, roughly 30 percent through mid-May. The two investment teams formed a year ago are up 7.32 percent and 2.19 percent — not half bad for newbies in this market.

How fast can you say "girl power"? Giving young, underprivileged girls the tools they need to make smart money decisions is the mission of the Investment Challenge started in 2009 by ING, in partnership with the nonprofit Girls Inc.

With some assistance and guidance, the teams build and manage virtual $50,000 diversified portfolios in real time as part of their financial education. But the 12- to 18-year-old girls make the final investment decisions and get practical, hands-on investing experience.

The girls participating in the program mostly come from urban areas and typically are in schools with high free-lunch ratios, says Laurin Cathey, head of multicultural affairs at ING. Beyond the competitive investing facet of the challenge, the teens are taught the basics of personal finance, such as saving, budgeting, credit, debt, investing and financial planning. They even open virtual bank accounts, though many have been inspired to open a real savings account. And they create short-, medium- and long-term personal financial goals.

Virtual investing, real profits
Then the teens are versed in the fundamentals of investing, such as asset allocation, diversification, portfolio turnover and valuation. To ease them into the investing world, the girls invest in mutual funds for the first six months, after which they are allowed to invest in individual securities for their three-year journey through the program. Each team member is tasked with identifying, researching and presenting at least one investment idea to the team.

All portfolios are managed and tracked using an online-trading platform that allows the participants to track their performance, as well as to see how they stack up against other challenge teams.

While the money they invest with is virtual, the payout is real. Any profits the team's portfolio makes are split evenly among the members in the form of college scholarships from ING.

Thierry Yungenge, a senior auditor for ING's corporate audit services in Holyoke, is a proud papa of sorts. "They have grown," he says with a smile in his voice.

He volunteers his time with the Holyoke, Mass., team and offers highlights of the first year. He focused on the basics first: teaching investments, financial markets and taking the mystery out of the financial lingo. "We would have the girls do practice problems and role play," says Yungenge. Then it was on to researching mutual funds. "Each girl had their own computer and each would decide what they liked and they would come to a consensus on what to buy," he adds. In phase three, they started researching companies and started trading stocks. "We gave them guidelines about how much to invest in stocks, mutual funds, bonds and cash," says Yungenge.

Three rules of investing
Teaching the benefits of a diverse portfolio was at the top of the lesson plan, because diversity mitigates risk. "They were reluctant about investing because of risks, but I told them you have to take some risk, you just need to be comfortable with the level of risk," says Yungenge.

The goal was to come up with a variety of companies. "I explained to them that if they bought Coca-Cola and Pepsi, because they are so similar, if one is down in the market, the other could very well be too .... They understand now that you can't put all your eggs in one basket," he says.

Secondly, "We taught them to begin their research with companies they know. You should invest in what you know," he says. The girls researched Viacom — owner of teen favorite MTV — Johnson & Johnson — because they like its products — as well as Coca-Cola, Pepsi and McDonald's, says Yungenge.

The girls were introduced to a number of research tools like Google Finance where they could look at a stock's performance over time. They were also told to watch the news for information about the companies they were considering. When researching mutual funds, examined Lipper rankings and looked at funds' tax efficiency and fees.

The third key lesson was patience. "Before anything was bought, the girls would spend two weeks following the company," says Yungenge — training for avoiding snap decisions to buy or sell.

Perhaps the biggest challenge for Yungenge was simplifying complex terms that baffle some adults. He has new appreciation for analogies, as they worked wonders it making concepts plain for the girls. He sees the results. "They have learned a lot. Their confidence has transformed them. One girl shared a story about when she was in history class and they were talking about the Depression, she was able to talk about the stock market, she felt very good about that," he says.

Sowing the seeds for financial success
"The earlier you can teach someone about money, the sooner it can take hold and they'll be better prepared to manage their money later in life," says Cathey.

Most children learn money lessons from their parents, whether their parents are capable teachers or not. Financial education is still not a mainstay in curriculums across the country, and after ING saw the results of its 2008 survey on black women and money — conducted in partnership with Essence magazine — the financial services company was moved to act, says Cathey. "We felt an obligation to use our expertise," he adds.

The survey looked at the spending habits of African-American women, and found that in general, they can be generous in helping others out financially, and also strong inclination toward consumption — some of it conspicuous. With those two habits, it's not surprising that many said they lacked savings and investments for the long-term. The key though, was that they said they were interested in learning more about finances.

The hope is that the program will help establish new patterns of behavior among the participants, and a side benefit already surfacing is the secondary wave of learning. "We see not only how the girls are changing, but that they are influencing others, their family, their friends. They are explaining to more senior family members that they don't need a lot of money to get started investing," says Cathey. "They tell us they look at money differently, that they don't spend as much at the corner store," he adds.

Financial literacy changes a community. "Those that aren't financially literate don't have the quality of life that those who do have," says Cathey.

In addition to money lessons, the girls get exposure to successful women in the corporate and nonprofit sectors. "They get role models and a support system to pursue opportunities," says Cathey. "Some of these girls didn't see themselves going to college. It wasn't a real possibility until now."

Girls rule
At 15, Katie Fitzgerald is a changed woman. "I learned what those fancy words mean, I'm not intimidated any more," she says proudly.

Though the Holyoke teen was already a saver, since she entered the program, she has opened a bank account and gotten serious. "When I go to the mall or go out to lunch, I have a budget. When I babysit, I keep some and I save some. I saved up $700 to buy a laptop," she says.

Along with finance fundamentals, she's learned patience. "I don't like watching the market going down and losing money. When it goes up, then I'm happy. But I learned the stock market, if it goes down, it doesn't necessarily stay down, it will come back up, eventually."

Jana Hamilton, 16, of Atlanta, says her first year with the program has been eye-opening. "I wasn't aware there were so many places to save, like savings and checking accounts, and so many ways to save, stocks, bonds, mutual funds," she says.

She knows now and she's not leaving the savings and budgeting lessons behind in the classroom, but practicing them. "When I go shopping for clothes I have to ask myself, do I really need that?"

With the success of the teams in six cities, ING plans to expand the program to 10 cities by 2013, says Cathey. In addition, ING is working with Girls Inc. to offer elements of the program online so that it can grow exponentially. "We invested in a real-time stock trading platform, a robust tool that does tracking and monitoring. We are looking to see if we can make it available to other Girls Inc. in cities where we don't have manpower in 2012 and 2013," he adds.

"This is an opportunity for us to make a difference, to make our mark," says Cathey, who is excited by what he sees.