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Kids Learn About the Bulls and the Bears

Pasternak, 35, became interested in teaching finance to young people after the birth of his daughter, Lexi, who is 18 months old. When should he and his wife, Lori, begin saving for her college education? he wondered. The answer: now.

Starting investments even that young, he realized, made a staggering difference. If a 12-year-old invests $500 a year for six years in a fund that returns 12 percent annually, that contribution will turn into just over $1 million at age 65. A 22-year-old who does the same will have a paltry $337,000 when he's 65. A 32-year-old will have only $108,000.

Thus, Pasternak, a former economics professor, consultant and now chief financial officer for Westwood Pharmacy, launched PlexEcon LLC, a company that provides money lessons for kids ages 9 to 17.

Parents can sit in on the classes, which cost $495 per child. While some finance classes for the young are aimed at ultrarich families — such as the "Financial Fluency Program" offered by Wealthbridge Partners for $150,000 per family — Pasternak says the PlexEcon course is for families with moderate incomes.

The essential idea he communicates to his students, Pasternak says, is the concept of compound interest and how money grows when invested. He demonstrates this by handing Brendon an envelope of $12 in play money, the first year's return on a hypothetical investment of $100.

What's the annual rate of return? Pasternak asks.

Brendon taps on his calculator. "Point — um," he says. "Twelve percent."

With the $112 invested for a second year, he makes $13.44. And so on, until year six, when the profit totals $97.37. Brendon is impressed, but he proves a skeptical investor. "But doesn't that depend on how it does?" he asks Pasternak. "And what happens if the company closes?" he adds. "Do you get your money back?"

Well, no, Pasternak admits. Next on the lesson plan: the concept of risk. — Melissa Scott Sinclair

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