The Wealth Effect

I have begun my third year teaching the financial literacy course. I implemented a competition that I dubbed the “Wealth Effect” when I first started teaching the course. Upon examining the curriculum I tried to create a simulated version of working and living as an adult to the student. The student would be living on their own and be responsible for certain expenses that they would be accountable for. These particular expenses would vary based upon the location that they chose to live, (rural, suburbs, city) be due on specific day, and the student would be assessed a late fee if the check was not received on time. Every Friday the students would receive a paycheck. Their pay was based upon their grade in my class further encouraging them to do the homework and study. Random events would be thrown at the students (ex. car accident, inflation, robbery) in addition students would be fined for certain unacceptable behavior (ex. chewing gum, cell phone usage, tardiness). Students were taught how to keep a budget and balance their checkbook through this exercise. As we embarked upon the topic of investing students were given a factious sum of money ($50,000) to invest in the stock market. Students also learned about loan requirements. Car loan projects played into the overall competition as I forced every student to purchase a car of at least $5,000. A down payment was necessary plus the students had to meet certain loan parameters with different interest rates based upon credit rating all determined by computer modeling and sensitive to each student. The students had to ensure that their monthly car payment fit into their budget. Students were also encouraged to contribute to their retirement account (401-K) as this amount was earning interest and their contribution, up to 5%, was matched by me, the employer. This amount of money coupled with whatever was left in their checking account plus their investment holdings (assets) less their car loan (liability) equated to their net worth. The student with the greatest net worth at the end of the competition is the recipient of 30 extra points.