| NEW YORK, March 25
NEW YORK, March 25 If there is one thing that
gives brokerage executives the cold sweats at night, it is the
attitude of younger Americans toward the stock market.
A startling 44 percent, for instance, think plain old
savings accounts are the best way to save for one's golden
years, according to the Generation Z and Money Survey, put out
last year by online brokerage TD Ameritrade.
Only 11 percent think the stock market is the way to go.
For online brokerages, that represents a dagger to the heart
of their business model, which depends on people investing their
cash, not than stuffing it under a mattress.
One fresh response to that threat: TD Ameritrade University
(tdameritradeu.com), a learning site to be announced
Tuesday at Thomson Reuters' 2014 Annual Online Financial
Services Symposium. It is a venue for college students to craft
simulated investment portfolios and for finance professors to
arrange investing competitions for their classes.
"Every statistic we have seen reveals that younger
generations are very risk-averse," says Nicole Sherrod, TD
Ameritrade's managing director of trading. "They think they only
need to start investing after they have gotten married and
bought a house."
That starts around age 28, Sherrod says, which means they
are missing out on a lot of potential compound interest.
The deep wariness of younger generations toward stocks is
understandable. They have grown up in an era of terrifying
market swings, from the dot-com bust to the financial crisis.
But their ultra-conservative response - favoring savings
accounts, for instance - is not going to get their retirement
savings where they need to go. The average bank savings account
offers an annual interest rate of 0.45 percent, according to
Bankrate.com, a level that does not come close to keeping up
The deeper issue here is low financial literacy. Experts
have long lamented that schools are not equipping youngsters
with the financial smarts to handle core life tasks like
budgeting and retirement saving.
Scary news headlines about the economy and the financial
markets are not helping.
"I think younger people are more wary of the stock market
because they have come of age during a recession," says Laura
Levine, president and chief executive officer of the Washington,
D.C.-based Jump$tart Coalition for Personal Financial Literacy.
"I think that financial literacy among kids is not at the
level we would hope because we are not reaching them with
financial education early enough, often enough -- and some we
are not getting to at all."
That is where TD Ameritrade University hopes to come in, by
promoting class portfolio competitions to foster financial
learning and an early familiarity with stock trading.
To be sure, it is not the only offering in this area:
Interactive Brokers Group's Student Trading Lab offers a similar
environment, where professors and students can try out simulated
trading accounts for free.
TD Ameritrade itself already has a platform called
"paperMoney" at its affiliated options-trading site
thinkorswim.com, where investors receive $100,000 of play money
to trade with in virtual margin accounts and individual
TD Ameritrade University is a more formalized curriculum
designed for college students and their professors. Sherrod
points out that Tuesday's announcement is the first phase of the
site's rollout, to be followed by a nationwide trading
competition in fall 2014.
But some students and professors have already been working
with the beta version, and with similar tools at
thinkorswim.com. One of them: Taylor Jolin, a recent graduate of
the University of Southern California who is now pursuing his
master's degree in finance from Georgetown University.
Impatient with finance classes that only taught abstract
investment theory, Jolin helped found a club - which has about
100 members - where students could approximate real-life trading
and compare notes, using the paperMoney platform.
"The first time students look at a trading platform, it can
seem very complex, like you are trying to land a plane with no
instruments," he says. "Then once you get started, it is so much
fun to be on a live platform with moving markets. It almost
becomes an addiction."
(Follow us @ReutersMoney or here.
Editing by Beth Pinsker and Douglas Royalty)