Participatory Budgeting Case Studies Show Students Make Good Investment Decisions

One reason adults reject Participatory Budgeting in schools is the concern that teens will “waste the money” – funding things like parties or buying stuff adults think the school doesn’t need. However, there is no data to support the idea that students waste money in Participatory Budgeting. Indeed, the reality is quite the opposite: Participatory Budgeting Case Studies show that kids make profoundly responsible investments — when given the chance.  

This post explores and celebrates some of the many wonderful real-world examples of how kids around the world have used Participatory Budgeting (PB) to invest in their schools and school communities. It will also point out how these choices reflect their deeper insights into financial literacy, civics, and the benefits of engaging the student stakeholders who are closest to the problem.  

These investments are so responsible and so discerning that after reading this post, you may find yourself asking: Why don’t adults invest more like kids?    

 

Fake money? Fake results! 

Imagine you are learning about the stock market in in a typical high school business class. As an assignment, you receive $100,000 in fake money along with the following rules: You have eight weeks to make as much money as you can in the stock market. At the end of the course, the person with the largest portfolio receives a $20 gift card to the local ice cream shop.  

Would you carefully research the stock market, conclude that the best long-term approach is simply purchasing a low-cost, no-load index fund? Would you decide to become a day-trader, spending hours each day nurturing your portfolio? Or would you ‘gamble your money,’ picking the riskiest stock(s) with the highest potential for a short-term win? Would you choose VFINX or GME?  

Remember: The money doesn’t matter; there’s no downside to losing it all. And since $20 is a paltry prize for eight weeks of work, you’re demotivated to maximize your virtual investments.  

With no risk and low reward, why not make some risky investments? If you’re lucky, you might even win a few ice cream sundaes. 

No wonder classroom stock market gambling – um, I mean, stock market “simulations” – create the wrong kinds of outcomes. They promote short-term, risky behavior because students see right through the sham.  

Fake money. Fake results.  

 

Real money? Real results! 

Because students know these simulations don’t matter, stock market recreations can create poor outcomes. However, with Participatory Budgeting, the outcomes are inspiring. When the money is real, the results are real and rewarding.  

There are now hundreds of case studies of PB in schools – too many to share in a single blog post. Instead, let’s review the kinds of investments students actually made (see Appendix). These include: 

• Renovating physical infrastructure: bathrooms, cafeterias, and other shared spaces  
• Creating new shared spaces: student recreation rooms, pergolas, gardens 
• Food: vending machines, upgrades to healthier foods 
• School spirit: School logos on clothing, painting the school mascot on shared spaces 
• Sports equipment: Indoor and outdoor sporting equipment for all students 
• Educational materials: Purchasing 3D printers, buying school or art suppliers 
• Internet / Information Technology: Faster connections to the internet, tablets, computers, printers 
• DEAI: Increasing equality by helping underserved populations, such as providing scholarships to special needs children for unique classes 

After adults review these choices, they often express surprise at their practicality and admiration for their utility. But it’s predictable: After all, as the people who actually attend the schools, students are in the best position to know which investments will improve them.  

 

CapEx and OpEx and Financial Literacy 

In financial terms, an operating expense (OpEx) is an expense required for the day-to-day functioning of an organization. A capital expense (CapEx) is a disbursement incurred to create a future benefit. For businesses, operating expenses and capital expenses are treated quite differently for accounting and tax purposes. Specifically, capital expenses are considered investments. Successful businesses find ways to balance OpEx and CapEx. If they don’t, they fail. 

Although OpEx and CapEx are typically reserved for business finance, the concepts of “spending money now” and “investing in the future” are also essential for healthy civic engagement and personal financial literacy. Civic engagement includes understanding how our tax dollars are used for OpEx (salaries for public servants, teachers) and in creating our infrastructure (roads, bridges, schools, for example). Personal financial literacy includes understanding our family OpEx (food, shelter, clothing) and our family CapEx (investments in education).  

Teaching the OpEx foundation of “value in the future” is challenging, especially when most personal finance courses introduce topics like retirement or buying a house. These are either so far in the future, they feel meaningless to most youth, or not aligned with their personal goals. (Not every person wants to own a house!) 

By contrast, Participatory Budgeting experiences provide students with a rare opportunity to learn about OpEx and CapEx in a way that relates to their lives. And some investments, like purchasing a 3D printer, provide a chance to discuss the interplay between CapEx (buying the printer) and OpEx (buying supplies).  

To make the grade, adults should invest like kids 

The American Society of Civil Engineers gives U.S. schools a D+ grade on infrastructure spending. The best estimates indicate a minimum of $38 billion annual funding gap for public school facilities across the country. 

The data is clear: To achieve a passing grade, adults need to invest more like kids.  

Appendix: Participatory Budgeting Case Studies 

This appendix provides even more information about Participatory Budgeting in schools. It starts with specific case studies and then provides more general references.  

 These websites provide more general information about Participatory Budgeting in schools.