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April is Financial Literacy Month, when Americans of all ages are encouraged to learn good money skills. (Darryl Estrine / UpperCut Images / Getty Images)

Dollars and Sense

An 11-year-old from Illinois uses her money smarts to win a nationwide stock market contest

By Zach Jones | March 28 , 2013
<p>Rachel Kelly, 11, won the nationwide Stock Market Game. (CNBC)</p>

Rachel Kelly, 11, won the nationwide Stock Market Game. (CNBC)

April is Financial Literacy Month, when Americans of all ages are encouraged to learn how to be smart about money. And this year, fifth-grader Rachel Kelly from Naperville, Illinois, is already at the head of her class. Kelly, 11, won a nationwide contest called the Stock Market Game.

Stocks allow people to own small parts of companies. When an investor buys stock in a company, the money he or she pays helps the company stay in business. In the stock market, people buy, sell, and trade stocks and other investments.

Students who participate in the Stock Market Game, run by the SIFMA Foundation, a financial-education organization, pretend to buy stocks worth $100,000. Then they have to read financial news over several days to see if their investments would have gained money or lost money, and write an essay explaining their choices.

A SAFE BET

Big businesses that are well-known are often considered safe investments, usually allowing investors to make money. When a business does well and makes money, more people buy its stock. That increases the price of its stock. If that happens, investors in the company can then sell their stocks for more money.

“I wanted to choose a company that was well-known,” writes Kelly. “I thought about products that I see every day—and cars came to my mind.” So Kelly picked the Japanese car company Honda Motors.

“Honda Motor Company is the No. 1 manufacturer of motorcycles in the world and the fifth-largest manufacturer of automobiles behind Toyota, Volkswagen, General Motors, and Hyundai,” says Kelly.

Honda makes many different kinds of cars, which Kelly thinks makes the company a safe investment. She explains that even if the cost of gas goes up, Honda has a good chance of staying in business because of the company’s fuel-efficient cars, which run on less gas than most cars made today.

“If one of their divisions is not doing so well, it won’t significantly affect the overall company sales,” she writes.

Because the stock Kelly picked performed well and her essay was persuasive, Kelly won this year’s contest. About 600,000 students from 4th to 12th grade competed.

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