Testimony of Mr. Gary Knell

“Financial Literacy Education: What Do Students Need to Know to Plan For the Future?” 

Hearing before the
Subcommittee on Education Reform
Committee on Education and the Workforce

United States House of Representatives

October 28, 2003

The need for financial education is frequently in the forefront nowadays, often coupled with the harrowing statistics of Americans' lack of knowledge about basic personal economics. For example, during the first quarter of 2003, more Americans filed for bankruptcy than any other time in history (American Bankruptcy Institute, 2003). Similarly, credit card debt has also increased to new highs. At the same time, 1 in 3 American teenagers carry credit cards as well as ATM cards (Tucker, 2003). And, in a national survey of 4,024 high school seniors, over 68% received failing scores on their knowledge of basic financial literacy facts. This is a sharp increase from results in 2000 whereby only 59% failed (Jump$tart Coalition for Personal Financial Literacy, 2002).

These are just a few of the many examples recognizing the limited knowledge many young or older adults have in making fiscally sound decisions in their lives. As a result, many initiatives are now addressing the need to provide Americans with better knowledge and skills on planning for their financial security. Research does indicate that individuals, younger or older, and with diversity in incomes and educational levels, benefit from financial education strategies, especially as their personal and economic circumstances change ((National Endowment for Financial Education, 2002). There is little data available however, that indicates where the "foundation" or the "building blocks" for financial literacy actually begin.

Some interesting citations shed some light on this question. In a recent speech by Chairman Alan Greenspan during the annual Jump$tart Coalition conference (2003), he stated, "The importance of basic financial skills underscores the need to begin the learning process as early as possible." Likewise, in a symposium convened by the National Endowment for Financial Education (2002) and resulting in the white paper, Financial Literacy in America: Individual Choices, National Consequences, one of the major recommendations was to view financial education within the scope of a "lifelong process" that must begin early in life through experiences that build on everyday activities or "teachable moments." Finally, in a national survey of students ages 16 to 22, 94% identified their parents as their primary source of financial education (American Savings Education Council, Employee Benefit Research Institution, and Matthew Greenwald & Associates, 1999).

Remarkably, within child development there is little debate about the critical role parents play as their children’s first and most important teachers. From the moment they hold their newborns in their arms, parents are setting the stage for their children’s future growth and development. They guide them in their first steps, their first words, their first friendships, and most of all, they help promote children’s innate curiosity for learning within safe and nurturing environments. Parents firmly believe that the life skills they foster during children’s early years will help them grow and compete in the future (The Child Mental Health Foundations and Agencies Network, 2001). In fact, Nuveen Investments conducted a survey with parents of elementary school children in Chicago and over 86% of parents indicated it was important that children understand the basics of money and finance (Nuveen Investments, 2000). Additionally, in a national study released by Public Agenda (2003) analyzing essential character values important for children’s success later in life, over 70% of parents felt saving money and spending it carefully was "absolutely essential."

The above data was instrumental in Sesame Workshop’s response to this obvious need and in keeping with its mission to help children learn and grow and reach their highest potential. Sesame Workshop, a not-for-profit educational organization, and Merrill Lynch, as part of the Investing Pays Off have come together to bring a financial education initiative, Talking Cents, that offers multiple media information and resources to help parents and other adult caregivers reach out to young children ages 3 to 5 years in fun and exciting ways. These educational resources are designed to transform children’s everyday experiences into life lessons that will help them explore the basics of finance and business. A little time spent in the early years will certainly pay off down the road in helping preschoolers establish the "foundation" or "building blocks" that can help them succeed as financially literate citizens.

The Talking Cents resources include:

• Educational Spots for Employees/volunteers (non-broadcast)—a collection of three video segments with familiar Sesame Street characters -- The Count, Elmo, Big Bird, Telly and Cookie Monster -- demonstrating three strategies, responsibility, patience, and planning, all important life skills contributing to children’s growth and future success.
• Special Issue of Sesame Street Magazine for parents -- provides ten important concepts such as understanding the basic value of possessions, how money is earned, ideas on saving, and the concept of giving to others along with suggestions and activities that can provide a foundation of finance basics for preschoolers during their everyday routines.
• A Sesame Street online site, Sesame Savings, with appealing and fun activities for preschoolers that highlight simple finance basics, coloring pages, and information for parents and other caregivers. An especially interactive component is the live story The Lemonade Stand whereby preschoolers can help their familiar Sesame Street friends, Elmo and Zoe, set up a lemonade stand business.

To date, the initiative has been rolled out in 10 major locations including New York, Los Angeles, San Francisco, Miami, Chicago, Boston, Dallas, Washington DC, Atlanta and parts of New Jersey with a particular focus on underserved and minority communities. Over 89,500 Sesame Street magazines and other resources, such as posters, were distributed through the National Association for Child Care Resource and Referral Agencies, Merrill Lynch employees and events during September 2003.

In the design of this initiative, great care was taken to ensure that the information was both developmentally and age-appropriate for preschool children. Furthermore, the information acknowledges the critical role parents and other important caregivers play in fostering early learning. The information and activities are meant to build on how young children typically learn about simple finance basics, mostly from merely observing adults engaging in daily activities such as using or saving money, paying for items, going to the bank, using an ATM, or making purchases.

Adults are often surprised that these tasks are the first introductions to financial education for young children. The program includes tips for parents and other adult caregivers that gently guide them to use these opportunities as "teachable moments" for finance basics. For example:

These activities and general information are important ways to establish a foundation for young children in the way they learn throughout their early years. Primarily this approach continues to support parents as their children’s most important teachers within the framework of naturalistic learning—the opportunities that present themselves during everyday routines or "teachable moments." The program builds on experiences that strengthen basic life skills linked to financial literacy, thereby providing a foundation for what is a "lifelong process."

Some very preliminary data is indicating the positive potential for such an approach. Included within each Sesame Street magazine is a reply card requesting the user to respond to whether or not the information contained in the magazine was helpful, and if the activities they planned to engage in was a result of that information. Of 73 responses to date, 87% indicated the information was helpful in explaining "money matters" to children in the areas of saving, spending, earning, money and value and they requested additional information on this subject. Approximately 65% of respondents indicated that they would encourage their preschooler to save his/her money to help pay for things he/she wants later; 63% indicated that they would teach young children that different objects have different values; and 57% indicated they would teach children the value of "delayed gratification" based on these resources. Although the data is extremely limited it does begin to demonstrate the impact such resources can have in the lives of young children and families. Sesame Workshop believes this is only the beginning and the Workshop seeks to lead the way in further guiding both adults and young children on finance basics (used previously in the testimony) as it has in so many other areas of young children’s education.