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A Financial Literacy Program for Kids, With Corporate Sponsorship

This article was written by in Education. 10 comments.


The best place to learn solid financial behavior is at home. Although a kid’s environment at school and among peers is important in his or her development, the biggest influence on a growing child’s set of values is the behavior of the parents. Parents are role models, so in a perfect world, they are best suited to solve young adults’ lack of preparedness for handing the world from a financial perspective.

Parents, on the other hand, are often ill-equipped for this responsibility, so public school teachers are left to pick up the slack for parents who can’t or won’t be the role models necessary. The lessons aren’t difficult, but financial behavior is so embedded in life at home, poor models there can easily undo any lessons taught in a school environment. Although New Jersey updates its public school curriculum standards a few years ago to require 2.5 credits in financial, economic, business, and entrepreneurial literacy, the typical class is not going to be effective for establishing solid financial behavior.

Eighth gradePrograms that teach financial literacy need to get creative. If there’s ever a chance for the banking industry to get involved with its future customers at an early age, this is it. Capital One sees the benefit in teaching young children how to use its products and is sponsoring the “Finance Park” program, coordinated by the non-profit organization Junior Achievement.

Finance Park is a mobile program for middle school students. After a few preparatory lessons in the classroom, the students visit one of these mobile stations and a Capital One bank branch. Students are assigned a family situation (single, married, with or without children, etc.) and a job, and are faced with simulations requiring financial decisions that have consequences. Due to a lack of preparedness in real life, most people learn how to manage their money “on the job.” But even in real life, the consequences of poor financial decision-making can be somewhat removed from the decisions themselves. The distance between cause (overspending, for example) and effect (not being able to afford a house due to high debt levels, for example) are so separated that learning on the job isn’t always effective as quickly as it would need to be.

Simulations can bring the cause and effect relationship into focus.

Capital One’s presence is significant in this program. The official name of the initiative is the “Capital One Junior Achievement Finance Park” with the necessary trademark symbols. Corporate involvement doesn’t stop with Capital One. There are more co-branded programs which one might expect to see corporations training young consumers to be life-long customers, in New Jersey alone:

Elementary school grades

  • Our Nation® Sponsored by United Technologies
  • JA More than Money™ (After-school Program) Sponsored by HSBC

Middle school grades

  • JA Global Marketplace™ Sponsored by MasterCard Worldwide
  • JA Economics for Success™ Sponsored by the Allstate Foundation
  • JA America Works Sponsored by Pitney Bowes & The Literacy and Education Fund

High school grades

  • JA TITAN (Internet based) Sponsored by Oracle
  • JA Economics™ Sponsored by the MetLife Foundation
  • JA Exploring Economics™ Sponsored by the MetLife Foundation
  • JA Banks in Action™ Sponsored by the Citi Foundation
  • JA Business Ethics™ Sponsored by Deloitte
  • JA Careers with a Purpose™ Sponsored by HCA & John Templeton Foundation

Junior Achievement programs in other states have different partnerships.

Shareholders are often impressed with corporate involvement in positive social initiatives and happy when companies are beneficiaries of tax incentives for charitable spending. I am concerned about the effect of branding in education lessons for eighth-graders. Corporations should not be involved with the education of children, but these corporations have money to devote to programs like Finance Park. If it weren’t for corporate sponsorship, programs like these would likely not exist.

Corporations have been involved with public education since the 1920s, but the trend has increased in recent years. As the United States falls behind other countries in education, citizens look to blame this country’s public school system. We look to corporations that create charter schools as an alternative, with the idea that schools with a better funding source, corporate profits rather than taxpayer money, will help solve the educational crisis. Results show that charter schools have mixed results when compared with public schools.

The lessons in personal finance are important, so it’s a good thing that kids are getting the exposure to real-life simulations. Can it be done without corporate involvement and indelible branding at an impressionable age?

Photo: daveparker
Junior Achievement Finance Park, Stanford CREDO study

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How to Invest in a Broadway Show

This article was written by in Investing. 9 comments.

If you’re interested in theater and have money you don’t mind losing, you may consider expanding your horizons by investing in a Broadway or off-Broadway show. Be prepared to lose money, though, because according to a variety of producers, only one show in five breaks even.

When a play or musical is in the planning stages, producers seek out investors to cover the costs of getting the show to opening night. After the show opens, income from the box office should pay for operating expenses. Any positive cash flow after expenses is distributed back to investors until their initial investments are paid back in full. Any profits after investors are repaid their initial investment are distributed back to the investors and producers, 50 percent to each (in the United States). Some shows never make a profit, but if you’ve backed a hit, you could see healthy returns, comfortably beating the stock market.

Broadway showFor the most part, individuals who wish to invest in theater, due to the risky nature of the business, must be accredited. The investor’s household must have a net worth of $1 million or more, excluding primary residence, or income of at least $200,000 ($300,000 for a married couple) for the past two years. There are ways to invest as a non-accredited investor, but the competition is higher for these opportunities because producers are limited in the number of non-accredited investors they can accept.

While the average investment from an individual is $20,000 to $25,000, you can often invest with $10,000, and sometimes with as little as $5,000. This minimum investment is lower than some mutual funds. The bigger the show and the higher probability of its success, the harder it would be to find an opportunity to invest at these lower amounts.

Ken Davenport, a Broadway producer with experience working closely with investors, took this concept of attracting smaller investors even further. When producing Godspell, Ken took to the streets, accepting investors with as little as $1,000 as a minimum investment. Investors received billing outside the theater and the chance to profit. With the play opening late last year and with the show not exactly being the hottest ticket in town, some investors in ken Davenport’s group, “The People of Godspell,” have reported that they’ve received checks towards paying back their initial investment, though the show seems to be far away from profiting for these investors.

The pioneers of attracting smaller investors to Broadway are Richard Frankel, Marc Routh, Thomas Viertel, and Steven Baruch. This team has produced seventy-five shows, and if an investor had invested $10,000 in each opportunity since 1985 through 2009, he or she would have received an annual rate of return of 27%, compared with the 7.29% of the S&P 500.

If you are not interested in Broadway or the dramatic arts, you may want to avoid investing due to risk. While financial reward is what all investors are seeking, investors in theater often look for intangible or invaluable returns. Producers will often offer investors a chance to be a part of the show, like attending opening night performances and after-show parties with the cast and creative staff, access to house seats, and in the case of Godspell and it’s pool of smaller investors, your name on a poster. For some, these benefits make investing worthwhile despite the risk.

If these benefits are not appealing to you, you may be only focused on the return of an investment, and stand to be disappointed if the show you back is like four out of five shows that never turn a profit.

Similarities to investing in the stock market. Just like a mutual fund, the best returns are reserved for investors who make the best decisions. Assuming you’re familiar with theater in the first place, you may want to become familiar with the production team’s track record before handing over any money to a show. While investors in the stock market may diversify across a variety of investments in an attempt to smooth out the peaks and valleys of investing over time, diversifying among a number of shows could be difficult. There may be only one show a season you find worth your investment, so your diversification must cover a long stretch of time.

Differences to investing in the stock market. When you invest in the stock market, you can do your research from your bedroom. You can read financial statements in the comfort of your own home, transferring money electronically to your bank account to your investment when you’re ready to purchase a stock or fund. All the information you need is available without leaving your house.

Investing in theater is more like investing in a company directly with a major financial commitment or receiving a substantial share of ownership. Before you make a major investment, giving you a substantial stake in a company, you’ll want to meet the executive team, analyze the financial documents, and handle more of the due diligence in person. When investing in a Broadway show, much of the information you need is not available online. You can use the Theatrical Index to look at every active production’s gross receipts and you can use the Internet Broadway Database to verify information about producers and productions, but it’s best to meet the producers in person, learn about the production, and determine whether you believe the show has the potential to succeed.

Early investors in Rent made a fortune; investors in Spider-Man: Turn Off The Dark probably won’t receive their initial investment back until the show has been running for four years, if it survives that long. Despite it being the most expensive Broadway show ever put into production, Spider-Man seemed like a safer bet, with a big name producer and a widely-recognized brand.

If you’re interested in getting started, here are a few suggestions.

  • Ken Davenport’s introduction is a good place to start.
  • Consider signing up for the Theatrical Index newsletter (linked above) to have access to financial information.
  • Find producers you’d like to work with, and send them introductory letters via email. Even if the particular producers you’re interested in are not currently looking for investors, you will be on their list to be the first to know when they’re seeking investors for their next projects.
  • Meet the producers in person and get to know the show in its early stages by attending table-reads and rehearsals.
  • Don’t set your expectations too high.

Would you consider investing in a Broadway show?

Photo: kevin dooley
BroadwayWorld, CNBC, New York Times

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What Happens If The Debt Ceiling Isn’t Raised?

This article was written by in Economy. 42 comments.

Democrats and Republicans in Congress, not to mention the President, are battling over what to do about the debt ceiling, an arbitrary limit of government borrowing set by Congress. The government borrows money from investors in order to pay its expenses, like salaries and Social Security, and if the government is unable to borrow, eventually money will run out. That’s a consequence of spending more than you earn, a basic personal finance concept that doesn’t translate well to building what was one point, though still may be, the most powerful national or sovereign economy in the world.

The government has approached the debt ceiling before, and every time, Congress has acted to raise the debt ceiling. Today, politicians are more divided than ever, and it’s looking like a firm deal is not going to happen right away. The most likely outcome is that Congress will delay the issue with a temporary extension of the debt ceiling, moving any action to the future — and closer to the next presidential election when more citizens are ready to engage in political fights. There’s a very slim possibility that the stale mate will continue past August 2, which is when, according to the Treasury Department, the obligations require more than the government has, and some tough choices will need to be made.

If this does happen, President Obama will need to make some tough decisions about who does not get paid. The most likely option will be to furlough parts of the federal government, so military salaries and Social Security payments would not be interrupted.

Rating agencies like Standard & Poor’s will likely downgrade the official AAA rating for the United States’s debt. Even if a temporary solution raises the debt ceiling, this is still a possibility. Many investors would not lend money to the government if its credit rating slips, and interest rates may rise to compensate willing investors for the perceived risk in the system. These interest rates could affect everything from mortgage interest rates to credit cards, making the cost of borrowing higher throughout the economy. However, Japan’s rating was lowered in 2002, and the country suffered no ill effects, so it remains to be seen if rating agencies’ opinions matter as much as people believe. Even S&P has indicated the effects of a downgrade would be minimal.

I think the BBC, whose audience may not be familiar with the intricacies of the U.S. Constitution, sums up the situation interestingly:

Why can’t the Obama administration borrow more? Because it is not in their power. All government borrowing has to be approved, under the US Constitution, by Congress… Perversely, Congress also sets the government’s spending commitments and tax-raising powers. This puts the Obama administration in the impossible position of being required to spend more than it earns, while also being prevented from borrowing the difference.

Another possible consequence is the further reduction of the value of a U.S. dollar compared to other currencies around the world. The dollar’s value has been falling for years, so it may difficult to say if a continued fall is the result of a government default, but it certainly can’t help. If the dollar continues to fall, the typical reaction would be to put money into hard assets like real property.

Over the past few years, people and businesses who could qualify as borrowers have had the benefit of very low interest rates. If interest rates do increase, it would come at a bad time. The country is still trying to claw its way out of a recession, and high interest rates are bad for businesses trying to expand. The good news is only some businesses are trying to expand; most are saving their cash as is evidenced by the reluctance to hire more than the bare minimum of employees.

If the consequences of a ratings downgrade are not as dire as the media portrays, as opined by experts, the issue shouldn’t really be receiving all the attention it has. It does bring to light the issue of spending more than the government can afford, but it’s more of a political issue than an economic issue. Means that our representatives are using the debate on the debt ceiling to distract from the bigger economic problems we are facing, like unemployment, a lack of business growth, a substandard education system, endless spending on wars, and ineffective regulation of the financial industry.

Photo: o palsson
Kiplinger, New York Times, BBC, Bloomberg, NPR

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The Cost of Summer Camp

This article was written by in Family and Life. 12 comments.

While growing up, my brother and I both benefited from experiences at summer camp, both day camps and sleep-away camps, at various points in our childhood. My memories from summer camp have stayed with me, and the experiences have shaped who I am. I first heard Pink Floyd at summer camp, from a counselor playing Wish You Were Here on guitar for the campers around a campfire. I received my first lessons with darkroom photography at camp. I learned how to be a radio DJ at the same camp radio station, as I later discovered, that Bruce Warren, the program director of Philadelphia’s WXPN radio station, got his start in the business. At camp, I (barely) learned how to swim. My first real kiss was at summer camp.

Most importantly, my time at summer camp provided me experience living away from my parents, moving my outside of my comfort zone at an early age. This probably developed into my sense of independence, my comfort with making my own schedule — while there was structure within the camp, I chose my own schedule and appreciated the flexibility — and my wide variety of interests.

These experiences all came at a cost — to my parents. I am not sure what my parents paid to send me and my brother away for eight weeks during the summer, but I know it was not cheap. The camp experience is even more expensive now, more than two decades later. According to a recent article in the New York Times, it’s not uncommon for these summer sessions to exceed $9,000. Participation is dwindling, as parents have more options for their children. Costs for running camps are increasing, and so is the fear of legal action in a society that grows more litigious.

The trend seems to be moving away from the long, all-encompassing camps. Rather than doing everything, new camps are focused on one activity and provide an intensive experience over a shorter time frame, like a week or a long weekend. These camps are challenging the traditional method of attending a camp where several activities are part of the experience over a four or eight week period. More and more, parents want to see results when they spend money — and the results they like to see involve skills that would be impressive on a résumé.

Kids who remain mentally active over the summer perform better at school, so there’s definitely an incentive for keeping students involved in activities during the off-season rather than leaving them in front of the television. Summer camp is worthwhile, but the question is how much to spend. Some camps have reduced rates based on financial need, but even non-profit camps with financial assistance have rates that can turn away many interested families.

Do you or would you send your children to summer camp, either day cam or sleep-away? Do you have any similar experiences?

New York Times

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Start Looking for and Collecting These Coins Now

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Throughout recent American history, the metals used by the U.S. Mint to create coins for circulation have increased in value relative to the currency. As a result, at certain points, the Mint changed the metal composition of coins to ensure the government would still make money on production. In 1982, when the amount of copper ... Continue reading this article…

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The Saver’s Dilemma

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At Consumerism Commentary, I’ve been writing about putting money into high-yield savings accounts for as long as this website has been around. Just as people started getting the message, banks pulled the rug out from under their customers. The Federal Reserve made cash easy and cheap from banks to access, and since the low federal ... Continue reading this article…

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Working With a Financial Adviser: Demystifying Certifications

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This is a series on finding, selecting, and working with financial advisers or planners. Recently, I evaluated the types of financial professionals to help readers start on the right track. This article looks at the varied professional designations and certifications. With a number of organizations granting different types of financial certifications, it’s easy to get ... Continue reading this article…

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Podcast 100: National Financial Capability Challenge

by Flexo

Today’s guest on the Consumerism Commentary Podcast is Carrie Schwab-Pomerantz, President of The Charles Schwab Foundation, which is sponsoring the National Financial Capability Challenge as well as the Make Change Count program. Consumerism Commentary Podcast #100 National Financial Capability Challenge: S04E22 / 124 Adobe Flash required Download – RSS – iTunes Table of contents [00:00] ... Continue reading this article…

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