Investments and retirement unit overview | Teacher Resources | Financial Literacy | Khan Academy

Hello teachers! Welcome to the unit on investments and retirement. As always, I encourage you to go through the unit yourself. If you have limited time, at least go through the exercises and the unit test to refresh both your own understanding of this material, but also to be familiar with what students are going to go through.

Now, this first unit on savings and investing, well, it is what it sounds like. Here, above and beyond the work on this course on Khan Academy, we encourage having discussions with the students. Run a discussion where you have students talk about why saving might be easier or more difficult in certain circumstances, how they might set themselves up to be in a better position to save, why certain folks are more likely to save than others, and what does that do to their future selves.

So they can start to project themselves into the future and think about how they want to set themselves up in 5, 10, 15, or 20 years, which isn't usual for a lot of teenagers or fairly young people. It's also really important for students to realize the importance of saving early. I've often found as an adult myself that when I tell younger folks about things that I wish I had done earlier, it seems to resonate with them.

So if there are examples from your own life or people that you know, say, "Hey, I wish when I was a teenager I knew this" or "I did this," or "When I was in my early 20s I knew and I did this. I started saving earlier. I saved more. I started getting better interest." That has a huge impact.

Speaking of interest, I think this is a good time for students to start to appreciate how much their savings can compound if they invest it appropriately and make even reasonable interest, or a reasonable return on it, even three, four, five, or six percent, as much as ten percent. That over many years can become a really significant return on their investment.

Now, the flip side of that is really in lesson two, which is thinking about risk and return. Because a lot of folks, when they start to invest, they start to shoot for the moon and they say, "I want to double my money by next week" or "triple my money." I think it's very good for people to realize that there are real risks. It's good to talk about that.

When you're investing, you're usually buying something from someone; say you’re buying a stock, and someone is selling it to you. Why are they selling it to you? When someone makes or loses money in, say, the stock market, where is that money going or coming from? Once again, this is a really good setup for a Socratic conversation about what type of investments might be prudent depending on different contexts in someone's life.

Also, talk about things that people know through their families or their friend circles — investments gone well or investments gone bad, and what they've learned from it. It's also interesting outside, once again, of the Khan Academy course. This could be a good time to start setting up mock investment portfolios on various investment websites where students can learn to quote invest fake money and see how it moves up and down with the stock market.

Some of them might build a little bit of false confidence if they get a little bit lucky. But if they're able to do that long enough, they're going to see that it really is hard to game the system over time. Hopefully, when they start having real money later on in their life, they'll be a little bit more prudent with it and recognize the risks.

Last but not least is planning for retirement. This is probably the hardest thing for students in their teens to fully appreciate. They almost think that retirement is impossibly far away. But once again, stories help to reinforce it — talking about family members who didn't plan accordingly, and also talk about how, even though you might be planning for retirement, which could be decades away, saving that money also gives you a cushion for other things in your life. Other major purchases or flexibility if there's a health crisis in your family, you need to support someone else, or you lose a job.

So saving is always a good thing. It’s good to think about retirement because hopefully, we're all going to be retired one day, but it also sets us up well for other things. Once again, for retirement, think about what it might cost to retire, the expenses that they might not fully realize, and then think about how, at that point, their savings and their investments will be what they are going to be living off of.