[MUSIC] And now, teaching kids about money.
Economics correspondent Paul Solmon has our story.
It's part of his ongoing reporting, making sense of financial news.
[MUSIC]
>> Oh, oh, hi. Welcome to Sesame Street.
Oh, look what Elmo has. His very own dollar.
>> A new financial literacy initiative from
Sesame Street. Money tips for tots starting with saving.
[MUSIC] If Elmo's going to save, that would distinguish him from a host of
grown up Americans. More than a third of them have a mere
$1,000 or less stocked away. In total, 29% of us have reported not
saving 1 penny for retirement. Related perhaps, we can't calculate our
way out of a paper bag. Get this.
Americans 50 or older were asked, suppose you had $100 in a savings account, and
the interest rate was 2% per year. After five years, would you have more
than $102, exactly $102, or less than $102?
2% interest, five years. What portion of the country didn't know
that more was the blindingly right answer?
Half. Might explain why 1.5 million Americans
filed for bankruptcy last year alone. No clue.
No cushion.
>> The toughest concept is really the idea of starting early around financial
education, and particularly the concept of saving.
>> Because, says Jeanette Betancourt of
Sesame Workshop, saving is self controlled with which we all wrestle.
>> So the way you can start with young
children is identify something that they would want.
And saying that you can't have it immediately, because it's something that
we have to build towards. [MUSIC]
>> In Elmo's case, that something is a hotly
hyped, irresistible object. [MUSIC] A stupendous ball.
[MUSIC]
>> Yeah, $5.
>> Since commerce on Sesame Street runs on a purely cash basis, if you want a
stupendous ball, $5 a piece, and you've only got, say $1, you can't borrow.
You have to save up for it. Tough sledding for Elmo, or even the
street hardened Grover, age six or so. How hard is it for you personally to save
instead of spending your money right away on something you want?
>> We are not born knowing all these things.
No, no, I, I had to learn them from my friends, and and my Mommy and my Daddy.
They taught me a lot.
>> Sometimes people do this test with kids your age.
They say, I'll give you a marshmallow now, or if you wait a little while, I'll
give you two marshmallows. But only if you wait.
>> Two marshmallows.
>> Would it be hard to wait?
>> Would be very hard to wait.
Yes. I think, you know, you know, just looking
at this marshmallow right now makes me want that marshmallow right now.
>> Leaving aside the dubious charms of the
food stuff, the marshmallow test is actually among the most famous and
replicated in the history of psychology.
>> There's a marshmallow. You can either wait and I'll bring you
back another one, so you can have two, or you can eat it now.
>> I want two.
>> Okay, I'll be back.
>> The self control experiment was first run
on 600 preschoolers at Stanford University in 1972.
Most woof down the little pillow of pleasure, but 1 3rd delayed gratification
long enough to get another.
>> You get two. You can eat it.
>> Follow up research found.
>> You can eat them now.
>> That the more temperate types had higher
SAT scores as teens. More recently, an ongoing study of a
thousand random New Zealanders from birth to now their 30s, yields even stronger
findings.
>> Those children have become the thousand most studied people in the world.
>> Stunningly, their self control or lack of
it by age 3 has almost perfectly predicted their future prosperity.
Duke Professor Terry Moffet.
>> So, the children who are very low self control are in deep financial trouble by
their 30s. Those who are very high self control are
doing really well, they're entrepreneurs, they've got retirement accounts.
They, they own their own homes and those that are average self control their right
in the middle.
>> Does it correlate with their initial socioeconomic status?
>> Self control is clearly more important
than the socioeconomic status of one's family, the amount of money that one had
growing up. and it's more important than school
grades, academic achievement and it's more important than scores on
intelligence tests.
>> Says fellow Duke Professor Dan Ariely, there is no more crucial struggle than
the rational long-term self against all the competing short-term players within.
>> Saving, good for the future.
Right now, I want something else. Exercising, good for the future.
Right now, I want to eat another slice of pizza.
Think about sex, right? You can, you can think about the amount
of political leaders who've taken dramatic falls over immediate
temptations.
>> As for Sesame Street's new push.
>> The idea of getting kids to go into the habit of saving earlier than we currently
do, and the idea of giving them some rules of thumb about what's appropriate
is incredibly important. [NOISE]
>> Ariely has his own rules.
He gives his kids old fashioned allowances with spending constraints
since the kids are exposed to the usual come ons of American culture.
>> Amitush/g, what's your favorite TV show?
>> My favorite TV show Power Ranger Samurai.
>> Ariely tries to counter the culture by
nurturing self control.
>> What would you rather do, watch one show now and then go and do all your homework,
or do all your homework now, and later get two shows of Power Rangers Samurai?
>> Two shows later.
>> Okay, Amitush if that's your choice, go
and do your homework now.
>> Eight year old Amit, about Grover's age.
>> Okay, sure.
>> Dutifully trudges off. It's Neta's turn.
At four, she's about Elmo's vintage.
>> So, what would you rather do, play for 10 minutes now and then go and clean your
room, or to clean your room first and then come and play for 20 minutes?
>> Play for a long time.
>> A daughter of Dan Ariely, Neta has
already learned the key lesson.
>> Okay, so go a clean now.
>> No.
>> Come on, go and clean, you said that's what you prefer.
>> No.
>> so here we have, this is not a
hypothetical. [LAUGH] Once you make it concrete.
>> This is generally a problem that
self-control sounds like a good idea, even to kids, in principle.
When you have to act on it, it's a bit more difficult.
>> Difficult, but essential, says
psychologist Terri Moffitt.
>> This generation of children is going to live to be, on average, far beyond 100
years old. And that means it's absolutely essential
for every child to learn how to develop self control skills so that they can
avoid dependency, poor health, and poverty in old age.
>> And avoid the siren songs of the world's
increasingly crafty pitchmen.
>> If people who are 15 now will have an even harder time dealing with temptation
than you and I are.
>> You think?
>> Yeah, I'm certain. Alright, because as technology develop,
what is technology going to do? Technology is going to help them delay
gratification or have more things to spend their money on now.
>> So, are the brains of most of us now
over-matched by the brains of[LAUGH] some very able people who have an incentive to
get us to act in the here and now?
>> I, I think so. There's really kind of a very strong
imbalance about how much we can tempt people, and how much people can actually
resist temptation.
>> And that, of course, is where Sesame Street comes in.
Elmo works various jobs to come up with his $5 for the stupendous ball.
>> Savings is not a natural concept, it's
something we all have to learn. If I'm a preschooler, I need examples on
how to work towards that saving. You model it, you show them, and you do
it during your everyday experiences as well.
>> In the end, Elmo earns the five bucks.
>> [INAUDIBLE] .
But then shares a dollar with his literally irrepressible pal.
>> Oh no.
>> Cookie Monster.
>> Me no have cookie.
>> For more than 40 years, an icon of
excess.
>> Me really want cookie.
>> Reminding us that though restraint may be the key to prosperity.
>> Here's $1 for a cookie.
>> Financial and otherwise, it's a daunting
challenge for Muppet and man alike.
>> Hey Elmo, that was really a nice thing you did.
[NOISE] I'm PBS News Hour Economics correspondent Bald Solman, and you can
call this the Colbert Report Retort. My response to Stephen Colbert's segment
poking fun at my segment about Sesame Street economics.
>> Fun for him, for me, transformative.
[LAUGH]
>> These monsters, Cookie and otherwise, are brainwashing our kids as part of a new
initiative called for me, for you, for later[LAUGH] which teaches tots the
importance of saving and self-control. This Muppet fiscal conservatism is based
on a social science experiment called the Marshmallow Test.
For more, we turn to Grover and an unnamed Muppet made of leather.
Sometimes people do this test with kids your age.
[LAUGH] They say I'll give you a marshmallow now, or if you wait a little
while, I'll give you two marshmallows, but only if you wait.
>> Two marshmallows.
>> Would it be hard to wait?
>> Would be very hard to wait, yes.
[LAUGH]
>> A Muppet made of leather. Colbert tossed off that line.
But as you can see, I still haven't really gotten over it.
So the theory is, that if I resist eating this now, then[LAUGH] I get to have two
later. Let's try it.
[LAUGH] Where's the marshmallow? [LAUGH] Oh well, let's try it the other
way. Here are two that I can have later as
long as I resist eating this one[LAUGH] right now.
>> Now, in our news hour story, we also
featured behavioral psychologist Dan Ariely who performed a self-control test
with his own daughter, Neta.
>> So, what would you rather do, play for 10 minutes now and then go and clean your
room, or to clean your room first, and then come and play for 20 minutes?
>> Play for a long time.
>> A daughter of Dan Ariely, Neta has
already learned the key lesson.
>> Okay, so go and clean now.
>> Come on, go and clean. You said that's what you prefer.
>> No.
>> so here we have, this is not a
hypothetical once you make it concrete.
>> This is generally a problem that self-control sounds like a good idea,
even to kids in principle. When you have to act on it, it's a bit
more difficult.
>> As Stephen Colbert was demonstrating on his report.
>> You know what?
I'll try it with a different food. Okay, here's broccoli, okay?
Now, if I resist this stalk of broccoli for 10 seconds, I can have two
marshmallows, alright? [LAUGH] Ready?
Go. I can't wait to find out what happens.
[LAUGH] I bet I can do it. [LAUGH] Uh-huh.
>> Three, two, one.
[SOUND]
>> I did it. [NOISE] And now, and now, because I've
been good,[LAUGH] I can have my broccoli.
[SOUND][NOISE]
In your face Elmo. I'm eating marshmallows.
[LAUGH]
>> We sent the video clip to Dan, Neta and her brother, Amit, for their reaction.
>> Hey Neta, what did you think of this?
>> what does he did to eat marshmallows
before broccoli?
>> Why does he get to eat marshmallows before before broccoli.
That bothered you?
>> Mm-hm.
>> Yeah. Amitush/g, any reasons why?
>> I think maybe because he's a grown up and
he has his own TV show, he, he can't follow, he doesn't need to follow.
>> Doesn't need to follow the rules.
Okay Colbert, you may have your own rules, your own show, care.
But, if as they say you are what you eat, I warn you.
There could be a transformation in your future, too.
[NOISE]
>> It's the Stay Puff Marshmallow Man. [NOISE]
>> Well, there's something you don't see
everyday.
[NOISE]