“Stocks over sneakers,” says the T-shirt, neatly capturing the premise behind First Generation Investors (FGI). Three college students launched the nonprofit, which uses real money to introduce high school kids from economically disadvantaged backgrounds to investing in the stock market, in 2018.
FGI was founded by Dylan Ingerman along with his brother Alex, and their friend Cole Mattox while attending the University of Pennsylvania. From a single location in Philadelphia and three kids, FGI now has chapters in 25 schools with 30 more planned to open this fall. In addition to Penn, these include Harvard, Vanderbilt, Middlebury, Tulane, and Duke, as well as historically black colleges and universities like Morehouse and Spelman in Atlanta. Nearly 500 students are enrolled in or have completed the program.
“The reason it’s called First Generation Investors is because none of these kids’ parents have had the chance to learn what they’re learning,” says Niso Nahmiyas, who helped found an FGI chapter at Duke University in Durham, N.C. The goal, he says, is to “stop the cycle of some people working hard and investing and others working just as hard but never having the opportunity to accumulate wealth.”
Last year, there were 27 official “graduates” – students who finished the program and also completed high school – at which point they come into control of the investment account set up for them by FGI. That number jumped to 109 this year and should grow as the program expands. Based on this year’s FGI survey, the demographic breakdown of participants is about 57% female, 42% male, 55% Black, 22% Hispanic, 11% white, and 10% Asian/South Asian. The majority of these students are hoping to attend college, including three who have been admitted to Harvard and wrote about FGI on their college applications.
Meme stocks, bitcoin, and Peter Lynch
Perhaps there’s never a “normal” time in the stock market, but the last three years have been particularly eventful. There was the 2020 Covid crash, a quick and massive economic contraction, and in the wake of that, the rise of meme stocks and digital currencies.
But the high school students in the FGI program don’t seem to get distracted by the occasional drama on Wall Street. The FGI curriculum includes a showing of what to this demographic must appear to be an ancient video featuring Fidelity’s Peter Lynch discussing market cycles and extolling the benefits of having, and sticking to, a long-term strategy. They discuss idiosyncratic versus systemic risk, with idiosyncratic risk illustrated using the example of a 2018 Kylie Jenner tweet that knocked $1.6 billion off the market cap of messaging app Snap.
They provide a grounding in the basics of equity investing and the dynamics of the stock market. But what really seems to grab students’ attention is another concept at the core of the program: the idea of compounding – making money on money over time. And why not? After all, these are 16- to 18-year-olds and they have a long run ahead of them.
Mortgages are boring
Cole and Dylan met during their freshman year at Penn. Both grew up in New Jersey, within commuting distance of New York City, and had been interested in markets since a young age. Both understood they had economic and social advantages not available to most people – parents who went to business school, family members working on Wall Street. They thought there might be a way to use the markets to help address the challenges of income inequality and multi-generational wealth.
That led them first to the issue of financial literacy. After a visit to the Wharton Social Impact Center to review the literature there on financial literacy programs, it became apparent that a lot of this didn’t work as well as it could, says Cole. But what did seem to work was using real money to teach kids about investing. “We thought this [investing in the markets] would have a more immediate and tangible impact than trying to teach someone about mortgages when they’re 16 years old,” says Dylan.
To that end, FGI provides students with $100 in $20 increments over the last five weeks of the program. The money is held by FGI in a custodial account and the kids are given a menu of mutual funds and ETFs in which to invest. Once they complete the course and graduate high school, they assume ownership of the account.
That the sums involved were dwarfed by the money changing hands around AMC or GameStop didn’t seem to matter that much. “I worried that given the small amount of money they might lose interest, but they were mostly happy to just have a stake in the game,” says Duke’s Niso. “Just asking the kids to think about this stuff sends them off in a new direction.”
Working initially with the three kids from Philadelphia’s Boys Latin Charter, Dylan, Cole and Alex began to sense they’d hit on something. “We saw that the program we had crafted was really ‘sticky’ – they all wanted to come back to learn more and ask questions. That was the lightbulb moment,” says Cole.
From there, they went on to develop a formal curriculum and adopted a “franchise” model for the program which would provide a higher level of autonomy to the chapters and make it easier to grow. They did an initial capital raise through GoFundMe, bringing in $10,000 in just two days in November 2020. “Every decision we made from early on was about scale,” says Dylan.
Within a few months they added Fordham and Harvard. From there, the interest has continued to snowball.
‘Squawk Box’ in the school hall
Brett Oslon teaches AP History and financial literacy at Motivation, a Title One high school in West Philadelphia. (He also serves as a senior academic advisor to FGI.) He estimates that about a third of the student body there is made up of “first generation students,” including a large contingent from African countries like Ethiopia and Liberia. He learned about FGI by chance one September Friday in 2019. He was alone in the school at the end of the day when the phone rang. On the other end was Blake Kernen, a cold-calling student from Penn working with FGI, asking to speak to the financial literacy teacher.
“Having taught in Philadelphia for 21 years I thought I’d heard everything, but this was the first time I’d heard this pitch,” says Oslon. “High school kids from impoverished areas are going to spend time with college kids talking about the stock market. And by the way, they’re going to give your students $100 to invest. It sounded too good to be true.”
Intrigued, Oslon asked around to see who, if anyone, might be interested. The following Saturday, he delivered 25 students for the school’s first class. In those pre-Covid days, the meetings took place in person on the Penn campus, a few miles but a world away from Motivation. Oslon says at first his kids were a little intimidated. “There were some socio-economic differences. Some of our students had a preconceived notion about what a University of Pennsylvania kid looked like.” But ultimately, it became a place for a “great exchange of ideas.”
“A lot of adults make the mistake of correlating poverty and intelligence,” says Oslon. “We have very intelligent kids who, given the opportunity, will do well. Opportunity is the biggest piece of the puzzle for our students.”
Good grades were not a prerequisite for the class. We were looking for kids with a “spark,” says Oslon. This is consistent with the program’s overall philosophy. “We don’t look at grades because we realize that the motivation for something like this isn’t tied to how they do in school,” says Cole.
Oslon likes to tell the story of two students who were late to class one day, talking in the hall. “Our principal was upset that they were late but when I spoke with them, I found out they were having a Squawk Box-like conversation about the value of compounding,” Oslon says. “One of them said something like ‘this compounding is insane.’ Both kids are in college now.
Of course, students this age aren’t necessarily known for long-term planning. Professor Roberto Quercia, who teaches a popular personal finance course at University of North Carolina at Chapel Hill, suggests incorporating a “holistic approach” would be useful if the goal of building intergenerational wealth is to be achieved. “Investing is an important part of this, but not the only part,” he says. Values – why you want money, what you plan to do with it – matter, too, he says.
Harvard professor John Campbell, who also teaches a financial literacy course, takes a similar view. Using “real money is good,” he says, but should be part of a broader financial literacy program. “The concern with financial knowledge is right on point, but there are many other financial decisions that people have to make that have nothing to do with the stock market but also contribute to wealth inequality.”
A big leap
This fall FGI is taking a big leap, more than doubling in size. Of the founders, Alex Ingerman has graduated; Dylan and Cole are both rising seniors, busy laying the groundwork to support FGI once they’re out of school. On Aug. 11, they announced a plan to raise an additional $500,000 to support all this growth. By Aug. 17 they already had pledges for $100,000. The money will be used to fund more portfolios and to bring on full and part-time staff.
Wall Street is starting to buy in. Global Endowment Management, an asset management firm based in Charlotte, N.C., recently stepped forward to fund the student portfolios for eight chapters for schools including Vanderbilt, Notre Dame, Wake Forest, and North Carolina A&T.
Professor Quercia notes that successfully managing personal finances is “20% knowledge, 80% habit.” To that end, FGI is working to establish the saving and investment habit in students early on. The hope is these habits will persist even when the markets go south, as they inevitably will. They understand that this is unlikely to solve wealth inequality on its own, but believe every little bit helps. Here again, the program founders are taking the long view, defining success as “the accumulation of household wealth over time.”
It’s an ambitious goal. As Cole says, “This is way bigger than a college project.”
Mike MacMillan is a writer living in Chapel Hill, N.C. He is working on a book on innovative solutions to the retirement crisis and wealth inequality.