Teaching Kids About Money: Skittles Investment Risk Game
What is risk versus return? It seems like an easy concept to understand, but how to help young students of finance understand the implications of this financial concept in investing? I invented a game that I used with my daughter and two friends (age 9 at the time), using candy, dice, and a simple notebook.
What is risk versus return? In finance, risk versus return is the idea that the amount of potential return is proportional to the amount of risk taken in a financial investment.
Risk versus return is a very important for small-time, personal investors. Conventional wisdom says that the riskier the investment, the higher the payout. But the opposite is also true. The riskier the investment, the bigger you can lose. The odds are good that if an investment carries a lot of risk, that it could go very well, or very, very badly for you.
The concept of risk versus return is easy to explain to people saving their retirement funds, because keeping what they already have earned is an underlying goal for almost everyone.
Is it better to invest in low-risk investments with low returns to assure that you preserve your capital (the money you invested in the first place), or are high-risk investments better performing choices over the long run?
I invented a simple game to help students explore this concept.
Playing the Risk Versus Return Game
Object of the Game
The students are trying to get the most candy by the end of play.
The game rewards students with a predetermined number of Skittles, M&Ms, or jelly beans candies if the dice lands on a number they have selected. Each student is given 20 candies to begin the game. They must "pay to play". The game is played in 10 rounds. (Adjust to suit your schedule.) The object is to see who has the most candies at the end of the game, and to keep track of the way they earned their candies. The students get to keep and eat their candies at the end of play. If you are playing with a large class, you may need to adjust the numbers.
Note this game could also be played with paper money from a novelty store or a Monopoly game, but I personally like Skittles better!
Number of Players
Playing this game in small groups of 3 to 5 students is advisable, because as a teacher you will be able to observe and comment on the dynamics of the game. But this game can also be played in a large classroom setting using a whiteboard or overhead projector.
Supplies Students Will Need
- Tally chart (using my reproducible image file) or piece of notebook paper for each student
- Something to write with
- 20 candies per student
Supplies Teachers Will Need
- A large bag of candy
- A standard, six-sided die, preferably a large one.
How to Play
- Explain to students that they are going to play a risk versus return game. They will each start the game with 20 candies. They can choose to play as many rounds as they wish, or not. Playing costs 1 piece of candy. During each round, they will have a chance to guess the number you will roll on the die. Before the round begins you will decide how many guesses you want to have. The more guesses you select, the less candy you will get in return if you are correct. If you don't guess the correct number, you don't get any candy in return.
- Show the students the following chart, either write it on a white board or a piece of paper. You can copy the worksheet from this article, which is included here as an image file. The chart shows the number of candies (the return) that students can get for their risk-taking. Each student will tally their progress during each round of the game. The worksheet is a tally sheet for each student and provides a place for them to total their game score.
Number of Guesses
Number of Guesses
Number of Candies Won
Use This Score Card to Keep Track of Student's Progress
Have each student keep track of the numbers they want to guess before you roll the die.
Tell your students:
Guess as many numbers as you want. Mark an “x” in the box showing your number guess(es). The more numbers you guess, the more chances you have to win, but the fewer possible candies you can win. See the chart above.
- Roll the die and announce the number you rolled to the students playing the game. Enlist the aid of a helper if this makes the game more exciting.
- Put an “O” next to the number rolled.
- Each round, keep track of how many candies you win in the Candies Won box.
- Have the students track the number of candies they won during each round, then add up their totals at the end of the game.
Game Notes and Variations
- This game is very flexible so you can play as many rounds as you wish.
- A variation of this game is to require students to pay out a predefined number of loss points (in candy) based on the risk they took. In this game variation, students pay to play 1 candy per round, and lose 1 or more candies each time the number they guess isn't chosen.
- Each student should receive the number of candies they won during the game. You may want to have sandwich bags or disposable cups on hand to hold their winnings.
- I recommend that you keep everything virtual until the end of the game so candy doesn't pass from hand to hand.
After Game Play
If you have a large class, ask the student with the highest and lowest returns about their game strategy.
- Did you have a strategy?
- What was your strategy and why?
- Did your strategy work? Why or why not?
- Create a chart showing each student's total number of guesses compared to their total return. Try to determine if there is a correlation.
- Ask students to explain in their own words how this game relates to investing money.
Stock Market Investing Concept: Risk and Return Background
During the events of 2008 and beyond, the stock market has been big news. Many people, both investors and non-investors alike, have turned their attention to the stock market, giving more attention to the financial markets than during any other time in recent memory. During this time, news about the stock market and investing has gained wide popular interest that most people used to leave to the experts. As a result, teaching children concepts about finance, economics, and investing is becoming more commonplace at earlier and earlier ages. I address some of the issues surrounding this phenomenon in my article Stock Market Investing and Children: Teach them Correct Principles.
My daughter, at age nine, entered a stock market competition with other students in her gifted program in Wickenburg. Thanks to a wise teacher who didn't believe in putting limits on children based on her grade level, she competed with and beat a team of students from middle schools and high schools across Arizona! We were all impressed and amazed that her team of three third graders placed second in the state in total money created during a 3-month investing period for their stock market competition!
When my daughter came back, beaming and with trophy in hand, I asked myself some questions about the scenario my daughter experienced, which seemed extremely superficial to me. As a self-taught small-scale investor, I knew the stock market to be a powerful but potentially dangerous place. Her exposure to the stock market competiton was limited to a scant 20 minutes every three or four days, where her team poured over stock ticker symbols, representing companies, and data provided by Yahoo Finance. This data included charts, graphs, and technical-sounding terms even most adults don't understand, like Price To Earnings Ratios.
After she participated in this stock market simulation event, I decided that I wanted to supplement my daughter's learning experience with some additional information. I wanted her to understand that investing in the stock market was more than a high-stakes adult game. One of the concepts we covered was risk versus return. I "invented" the risk versus return game to teach a complicated idea to young children learning about the stock market, but this concept (with a discussion of its limitations, of course) could be used in a classroom of middle-school, high-school, or even adult students.
Types of Investment Risk
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