In a bid to capture more of the youth market, Liberty Financial Corp. is going back to school.
The Boston-based mutual fund company, which manages $31 billion of assets, launched a program last week to educate young investors about money matters and increase awareness about investment options for children.
Coinciding with the introduction of its Young Investor Program, Liberty announced it was lowering account minimums for custodial accounts for the Stein-Roe family of no-load mutual funds to $500.
The funds are managed by Stein Roe & Farnham, a Chicago-based subsidiary of Liberty Financial Companies.
Liberty also eliminated minimums on custodial accounts for the Liberty Financial funds, allowing investors to open a custodial account for just $50.
"While the industry trend is to raise new account minimums, we have lowered our minimum to help kids invest," said William P. Rice, director of corporate communications for the Liberty Financial Cos.
And getting children to invest and save is central to the Young Investor Program.
Liberty is developing products, materials, and educational seminars to introduce young people to the basic principles of money, economics, and investing.
Teaching Them to Save
The program is geared toward teaching children about money early so that they will develop good savings and investing habits, Mr. Rice, who is in charge of the program, said.
Age 3 is not too soon to start, he added.
"The youth market is our future," said James M. Grant, senior president for marketing at First National Bank of Chicago.
"Banks have historically been very active in teaching kids about money," Mr. Rice said.
"We want to start teaching them about savings and investing. That is where we can make a difference."
Liberty officials have talked to both small banks and some large money center banks about offering the seminars in their branches. Banks have reacted very positively to the program, Mr. Rice said.
Educating young investors "will increase mutual fund sales and raise Liberty's visibility," Mr. Rice said.
But there are big benefits for banks that target children, too. "It's not going to hurt their CRA requirements," Mr. Rice, said referring to banks' obligation to reinvest in their communities.
After evaluating results from a Harris/Scholastic Research survey, Liberty commissioned in May, the company found there was a need to improve children's understanding about financial issues.
About 88% of the children surveyed said they had "learned everything they knew about finance and investments from their parents," according to the poll.
Helping Hand for Parents
To help parents, Liberty has published the "Young Investor: Parents Guide" which it plans to make available in bank branches.
The 50-page book covers topics such as the value of money, financial planning basics, saving and investing, financing college, and giving minors stocks and mutual funds.
Harris/Scholastic Research, a division of Louis Harris & Associates, interviewed 1,389 students in the eighth to twelfth grades at public, private and parochial schools in the United States.
The survey measured students' attitudes toward and experiences with money and investments.
Knowledge is Power
"It is no surprise to us that the more knowledgeable students are about money, the more likely they are to save and invest," said Kenneth R. Leibler, president of Liberty Financial Companies.
So, the theory goes, education can increase business for companies that sell investment products.
Based on survey results, however, Liberty may have a long way to go before teenagers flock to mutual funds.
Growth of Mutual Funds
While the survey found that 64% of the high school students polled understand stocks and 44% know about bonds, only 22% could define a mutual fund.
"It is interesting that students are least knowledgeable about mutual funds," said Porter P. Morgan, investment strategist at Liberty Financial.
Mutual funds have become "the investments of choice for millions of Americans in the last decade, particularly for first-time investors," he said.
"I think that mutual funds are a great way to introduce kids to the stock market and saving," said Neale S. Godfrey. Ms. Godfrey is the author of "Money Doesn't Grow On Trees: A Parents Guide To Raising Financially Responsible Kids," to be published next year, and "Kids Money Book."
Lack of Marketing
Banks are very interested in attracting families and are becoming much more sophisticated in their marketing, Ms. Godfrey said.
However, few banks have focused their marketing e children.
Banks are not interested in attracting them "because young people are low-balance high-maintenance customers," said Dale Bradley, assistant to the president at Young Americans Bank in Denver.
The bank serves customers under age 22. Nearly 93% of their 16,000 customers maintain savings accounts, Mr. Bradley said. "Our customers, as a trend, are saving," he said.
Although mutual funds are not sold through the bank yet, "It is in the cards," Mr. Bradley said.
A Similar Course
Young Americans Bank, which manages about $9 million of assets, has also introduced a program to teach high school students about mutual funds.
"We would absolutely support this type of program" Liberty has launched, he said.
Some banks have developed savings programs for children, including First Chicago, the nation's 10th largest bank.
First Chicago's First Generation program, which has 64,000 customers, allows children to open a fee-free savings account with just $1.
Chemical Bank, New York, is also returning to the classroom. This fall a Chemical employee will teach a course in financial planning at George Washington High School in New York.
The curriculum includes lessons on savings and investment alternatives.