Roughly a year after the highly publicized incident, Ralph Baker Jr. stands before a small crowd talking about Don Imus and the Rutgers University women’s basketball team. But this isn’t a discussion about race or propriety–instead the focus is on the future of radio. “If satellite radio was ‘all that,’ Don Imus would have gone to satellite radio,†says Baker arguing against investing in either Sirius or XM. “True,†replies a young man, nodding his head in approval. Baker, a director in the New York City office of business advisory firm FTI Consulting, isn’t speaking to investment bankers. His audience is comprised mostly of 12- and 13-year-old boys, who are there to decide what stocks to purchase next.
They are members of the New York Shock Exchange, a youth program that combines sports and business by teaching kids about basketball and investing–roundball and round lots, which are the standard units of trading securities, usually equaling 100 shares of stock. Founded by Baker, the group holds periodic investment meetings with students who also travel around the New York tri-state area competing in Amateur Athletic Union basketball games.
Teaching children about finances–and starting early–is critical. With part-time work, teens are earning an average annual income of $2,634, according to a 2007 study conducted by research services firm The Harrison Group, based in Waterbury, Connecticut. Tack on an additional $5,496 of mom and dad’s money that young people burn through every year, and the total spending power of teens is $216.3 billion. But how many teens are equipped with the financial skills to budget, save, and invest the dollars they are pocketing? If the behavior of college students is any indicator, not many: Among college seniors, 56%carry four or more credit cards and have an average total balance of $2,864, according to student loan lender Nellie Mae.
Parents should start planting the financial seed with children early on, says Tom Henske, a partner at Lenox Advisors, a New York City-based financial advisory firm. “That’s when people are most motivated and that’s when you have to lay the foundation for all the planning,†says Henske, who heads Lenox’s Money-Smart Kids program. “Start by creating a money constitution–an agreement in writing between husband and wife that acts as a corporate mission statement.†Sit down with your partner and agree on your money values, he adds. It is a task for parents because most schools aren’t teaching students about personal finance. According to the National Council on Economic Education, only seven states require that high school students take a personal finance course to graduate.
Baker created the New York Shock Exchange to empower his only son, Ralph Baker III, and other teenagers, with the financial knowledge necessary to succeed in life. “It’s really a life skill,†says Baker, an animated 41-year-old, who is just as passionate about sports as he is about investing. “Companies aren’t responsible for [their employees] anymore; saving for retirement is your responsibility.†Determined to start a basketball team that could also help young men