Teen investors lured by a 'game' that can pay

Many pounce on notion of letting money do work

When Bibi Schweitzer turned 11, her dad gave her $100 to invest - any way she wanted.

"The concept of the stock market was amazing. I could put my money somewhere and have it make money for me," says Bibi. "We researched companies and learned how to read stock quotes."

In the end she picked a company she knew well: McDonald's.

Five years later, her stock - held in a custodial account - has more than doubled. That first lesson in investing inspired her to invest money she earns baby-sitting and doing other odd jobs. Her portfolio now holds 20 stocks, worth thousands of dollars. She aims for quality, she says, and buys into companies with which she's had firsthand experience, such as Abercrombie & Fitch, Estee Lauder, the Gap, and AOL Time Warner.

Bibi is part of a small but growing group of teens swapping stock tips in high school hallways, following Wall Street as closely as an 'N Sync concert tour. According to a 2000 Merrill Lynch study, 12 percent of teens 12 to 17 years old own and trade stock, up from 7 percent two years ago. Interest in high school investment clubs is on the rise, and slightly more than half of America's teens took a class in school in 1999 that at least touched on investing.

"Kids have become very involved, and want to become more of a part of this. It's all walks of teens," says Mitchell Slater, a vice president at Merrill Lynch.

Teens say they're curious about the highs and lows of the stock market, and point to how the Web easily helps them make trades and access a range of company information. They typically invest small amounts (in the hundreds or low thousands) longer-term and in companies whose products they're likely to buy. Some receive money from relatives, others earn their own.

"They get the idea of long-term savings and build knowledge of the stock market," says Janet Bodnar, senior executive editor of Kiplinger's Magazine and author of "Dollars and Sense for Kids." It can be an exciting way to educate kids about money, short-term and long-term savings, and compound interest, she adds, as long as parents point out the dangers, too.

One issue: Kids can get too caught up in competing.

Interest in investing has also sprung up because of the The Stock Market Game, a popular teaching tool created by the Securities Industry Association. The game is played mostly online (www.smgww.org) and by some 600,000 students in Grades 4 to 12. After registering for an account online, student teams get $100,000 in play money to invest. They research, "buy," and track stocks over a 10-week period, competing to make the most money.

"[Real investing] is a game. It's another way to exercise your mind. I'm a competitive person, and I like that aspect," says Bibi, who belongs to her school stock club and has also attended a business summer camp.

Though children under 18 cannot trade without parental consent, the Web has given kids more autonomy. When a custodial account is set up, parents typically have to phone in trades on a child's behalf. The same rules apply for online accounts, but teens say they use passwords and trade on their own. Parental monitoring varies widely.

Because they live at home and sometimes spend their parents' money instead of their own, kids may take greater risks.

"The stock market is a gamble. There is that risk of kids losing sight of real risks when they live at home, but as a parent you help them discuss that," says Kate Kelly, author of "The Complete Idiot's Guide to Parenting a Teenager."

She says teen investors, like adults, should track firms in the newspaper and closely read annual reports. Parents must teach kids the importance of long-term investing, she says. They should help kids avoid colossal mistakes, but let them learn on their own - ideally with their own money.

Charles Goetting of Charlottesville, Va., learned the hard way about taking too many risks. Charles, who is 16, began trading online a year ago. He made a $250 profit when he sold Cisco Systems stock early last year. But he also took some hits.

"I ... got a false sense of security with investing and not doing much research. Then I lost a fair amount because of stupid mistakes," he says. "Now I research my companies much more in-depth."

(c) Copyright 2001. The Christian Science Publishing Society