Lecture Notes: Teaching Kids About Money

Introduction

• Presented by Judy Woodruff, featuring economics correspondent Paul Solman.
• Focus on a new financial literacy initiative from Sesame Street.

Key Concepts in Financial Literacy

Importance of Saving

• Elmo introduces the concept of saving money.
• Statistics:
  • Over a third of Americans have $1,000 or less saved.
  • 29% have not saved anything for retirement.
• Emphasizes the necessity of starting to save early.

Self-Control and Financial Education

• Jeanette Bettencourt from Sesame Workshop discusses saving as an act of self-control.
• Financial education should focus on delayed gratification:
  • Identify something children want and explain the need to save for it.

The Marshmallow Test and its Implications

Overview of the Marshmallow Test

• A psychological experiment measuring self-control:
  • Kids can choose one marshmallow now or wait for two later.
• Study conducted at Stanford in 1972, replicated many times.
• Follow-up studies show that children with better self-control have:
  • Higher SAT scores.
  • Better future financial outcomes.

Findings from Longitudinal Studies

• A New Zealand study tracks children from birth into their 30s, showing:
  • Self-control at age three predicts financial stability in adulthood.
• Low self-control correlates with financial difficulties while high self-control correlates with:
  • Entrepreneurship, home ownership, and savings.

Socioeconomic Status vs. Self-Control

• Self-control is more critical than socioeconomic background or academic performance in predicting financial success.

The Challenge of Impulse Control

• Self-control struggles manifest in various life choices:
  • Saving for the future vs. immediate gratification (e.g., eating, spending).
• Importance of teaching children self-control skills to navigate future challenges.

Strategies for Teaching Kids

Techniques from Parents

• Parents should provide allowances with spending constraints.
• Encourage children to make decisions with long-term benefits:
  • Example: Doing homework first to earn extra playtime.

Sesame Street's Approach

• Using characters like Elmo and Cookie Monster to teach these concepts:
  • Elmo learns to save for a "Stupendous Ball" and shares with friends.
• Importance of modeling saving behaviors in everyday life.

Conclusion

• Financial literacy education is essential for children:
  • Helps them develop self-control and savings habits for long-term prosperity.
• Acknowledges the challenges of self-control in an increasingly consumer-oriented culture.