Paying for college has been a major challenge in recent decades due to rising tuition costs, fees, and even daily living expenses. To help students develop personal financial literacy skills and potentially help pay off student debt, the University of Kentucky is creating investment accounts for all of its students by 2023. The UK Invests program is part of a holistic wellness initiative for students, combining physical and financial well-being. The investing component of UK Invests is partnered with Fidelity and provides an app for students to use on their smartphones and other devices. This initiative is being funded privately through the school’s endowment and philanthropic (donor) support.
Teaching Investment Strategies
Learning to invest is a key tool in financial literacy, but you must be 18 to open an investment account on your own. Fortunately, teens and college students don’t have to expend real money to try their hands at investing: investment simulator apps let users pick investments and track them without actually purchasing them. Years ago, this was done using newspapers in Economics and Finance classes, requiring students to check the daily changes in stock prices by hand! However, the apps don’t cover the whole thing: they typically lack options trading and do not educate users about the capital gains tax they will have to pay on any investment profits they cash out. Real investment apps also often have trading fees that can accumulate to substantial amounts, which users of investment simulator apps may be unaware of.
Academically, individual classes can help high school and college students learn the basics of investments and investing strategies. Several colleges and universities have investment funds run by students – overseen by faculty members – to teach students about the financial industry. Some funds are jointly run by students from multiple universities, such as those within the prestigious Ivy League. Student Managed Investment Funds, or SMIFs, have become increasingly common since the early 2000s and the proliferation of real-time investing technology like investment apps. However, these classes and funds tend to be limited to college students in majors related to business and finance. All teens and college students need to learn the basics of investing, which makes the University of Kentucky’s individual investment funds an important innovation.
Outside of classes, college students can participate in extracurricular investing clubs. The Covid-19 pandemic and associated lockdown have given young people ample time to learn about stocks, leading to a surge in interest in investing clubs. Some of these investing clubs work with the SIFMA Foundation to educate new members, allowing members to use SIFMA’s simulated Stock Market Game before chipping in real cash. While student-run investing clubs are an excellent tool for young people to learn about investments, their quality and seriousness may vary by club. Colleges and universities must provide financial literacy education rather than assuming that student-led clubs are automatically sufficient.
Investment Funds for All Students Helps Expand Equity
One benefit of the University of Kentucky setting up an investment account for all students is that this move helps expand equity in financial education. Without schools leading the way, investing in stocks and bonds is often seen as part of the “finance bro” culture, potentially dissuading many women and minorities from joining investing clubs. Getting all students involved in learning about investing and finance improves financial outcomes for all demographics and helps stimulate the economy. Expecting students to find their way individually to investing individually can lead to thousands of young people making poor financial decisions.