Financial tools help students increase knowledge

Ben Sexton, freshman in engineering, purchased an Individual Retirement Arrangement last summer. The plan was supposed to provide him tax advantages and help him save money. He did not expect his plan to lose 20 percent of its value in a few short months.

“I was talking with my dad; he said it was smart to start saving now,” Sexton said. “I knew it could drop, but it’s been a little shocking that it could go down this much.”

Sexton said he was persuaded by his family, who thought the investment would be a good idea. He said the outcome has caused him to rethink some of his financial decisions.

“I think I might hold off on purchasing any more stocks for right now,” he added.

This result has been common for stock investors across the globe – but losses that students are experiencing may be magnified by the growing cost of paying for a college education.

Some institutions are making it one of their goals to educate students about financial responsibility in the stock market, including the University’s Business Instructional Facility that opened last fall.

Kari Cooperider, assistant director at the facility, said there are several software programs in the building’s Market Information Lab that allow students and instructors to take advantage of learning how the market works through historical data.

“Textbooks and the classroom environment are very abstract and theoretical,” said Martin Maurer, director of the Market Information Lab. “We have some applications here that actually allow you to learn some of these concepts in a much more interactive way.”

The lab also includes a trading simulation tool, which allows students to participate in simulated stock market trades and investments, he said.

“It’s the real deal in terms of software,” Maurer said. “We have students trade against each other and compete against each other.”

The trading simulator concentrates on “day trading” by looking at the results of trading in the short term through the eyes of a broker – the person who mediates the exchanges between a buyer and seller.

“We could have our students sit down and we could simulate that today’s the day when the Fed issues the information about unemployment,” he added.

The program attempts to make the simulation as true to life as possible, including the addition of advanced software tools and other stock market staples.

“There’s a ticker that runs across the top,” Cooperider said.

Actual data from stock markets becomes available to students after a delay.

The risk of someone using the data for personal gain remains too great to allow immediate stock prices to be used in the lab, Maurer said.

With or without the most up-to-date stock information, instructors say they have found interesting ways to help students understand the financial world, using the simulator program or other methods of teaching.

Elisabeth Oltheten, professor of finance, operates a stock simulator from the perspective of an investor making long-term decisions in investing.

“We’ve been on the web since 1995,” Oltheten said. “It can be accessed from anywhere in the world.”

The University of Illinois Securities Exchange Simulation, UISES, implements the stock market’s closing prices to help students think about long-term investment, she said.

Oltheten also teaches a financial modeling class, which aims to help students understand financial relationships, including bond prices and risk assessment.

Kevin Waspi, Chartered Financial Analyst and professor of finance, teaches a real client portfolio management class.

“This class is where we manage real money for real people,” Waspi said. “The students basically are doing fundamental analysis on companies.”

Waspi said the class constructs presentations and the students choose whether a project should be recommended to clients, who are companies participating in the class.

“It’s forwarded to the clients, who usually take our advice,” Waspi said.

He refused to comment on the names of specific companies used in the course.

The class allows students to learn in an unstructured environment, he added.

“If you have a retirement account someday, maybe one of these students will be managing the money in it for you,” Waspi said.

Outside of the classroom, the University is increasing financial awareness for all majors, said Nathaniel Banks, director of Campus Community Interface Initiatives. Money Smart Week, a program developed to assist all students in understanding financial basics, kicks off next week.

He said one of the programs includes budget-building, which allows students to learn about personal finance, as well as where to find financial resources.

“It gives them a sense of the realities of food, clothing, shelter, and what all of that amounts to,” Banks said.

He said the program is primarily targeted at freshman and sophomores, though it is open to any student.

“They basically just go through the exercise and we tell them what they would need financially in order to have a successful experience,” Banks said.