Imagine finding yourself in the winter of your life without a dollar. Imagine yourself at your most frail, lacking even the dignity of a retirement community. Imagine that you'd never heard about investment or the stock market when you were growing up, that you didn't know the difference between a stock or a bond or a 401(k). Imagine that this is happening every day in America's inner cities.
Mellody Hobson didn't just imagine it -- she imagined she could stop it.
Still in her early 30s, that situation will never befall Hobson. She's president of Ariel Capital Management, a Chicago -- based investment firm that manages over $10 billion in assets. But after Hobson's firm conducted research which showed that black children do not hear about the stock market as frequently as young white children, meaning they do not invest as adults as frequently as whites, she decided to act.
Her firm created an inner-city charter school, the Ariel Community Academy, on Chicago's south side. Along with small class sizes and after- school programs, Ariel Community's curriculum focuses on financial literacy.
From first grade, students can help invest a $20,000 portfolio. As they grow older, students have a more autonomous role, managing a larger portion of the capital. Meanwhile, students are taught about mutual funds and investment strategy.
By the time students graduate the academy in eighth grade, they give the original $20,000 back to the incoming first grade class and use the return on their investments toward academic scholarships or philanthropic donations.
When Anthony Deering, CEO of The Rouse Company, got wind of the program, he saw an opportunity for Baltimore. Deering contacted George Roche, president of T. Rowe Price and the two decided to implement a similar program at the New Song Academy in Baltimore City's Sandtown-Winchester area. The students at New Song come from families with median incomes of $10,000.
"Tony became familiar with what was being done at Ariel, kids understanding money and budgeting and all of that, and we thought we could do something like that in Baltimore," said Jackie Hrabowski, director of community relations for T. Rowe Price. "Our goal is to ultimately help support their pursuit of higher education and training and to be workforce ready."
The New Song model differs a bit from the Ariel model. Ariel Capital Management founded their charter school, whereas T.Rowe Price and Rouse Company work with an existing school. "This is a terrific school that is really trying to make a difference in the lives of these kids," said Robyn Brenza, part of the public relations staff at T. Rowe Price. "Students are urged to stay in school while nearly half of their peers in the public city schools drop out."
The program also differs in terms of its distribution, both in amount and time. Whereas the Ariel program begins at first grade with $20,000 and ends at eighth grade, the New Song Model begins at sixth grade and ends at 12th, with a starting capital of $50,000, with $25,000 from each company's foundation. The companies have committed $25,000 per year to each sixth grade class since 2000 to the year 2007. The money is invested in T. Rowe Price mutual funds and is managed by the company's representatives.
"The interest/income accumulated by the time they graduate from 12th grade is to be available for scholarships," said Hrabowski. "The principal of $50,000 is to return to the incoming sixth grade class so the cycle can continue indefinitely." Since New Song's classes are also small, and the starting capital investment is larger, students stand a good chance of supplanting a significant amount of a state college education.
But beyond financial backing, both companies lend a hand in orienting students on topics relating to business and economics. "In addition to financial support, we decided to try to put in place an educational component," said Hrabowski. "Our volunteers would work with the students over course of their educational career beginning in sixth grade. Our volunteer base offers a year round program, once a week, every Friday helping kids understand more about budgeting and economics. We also stress the difference education makes in getting a job, what it takes to live and survive."
The volunteers represent all aspects of the company. "We have vice presidents, retirement plan coordinators, investment center reps, all teaching this curriculum," Hrabowski said.
T. Rowe Price also works with the New Song Academy to develop perspectives on working in the financial industry. The company just had an annual job shadow day, on Feb. 22, where each of the 52 New Song students was paired with a host at T. Rowe Price. "The idea is to give kids a sense of what kind of skills it takes to get a job, to keep a job in the field," said Hrabowski.
For students at New Song, the opportunities might mean the difference between a healthy retirement and an end with no means.
