JUDY WOODRUFF: Now, teaching kids about money.
Economics correspondent Paul Solman our story.
It's part of his ongoing reporting Making Sense of financial news.
ELMO, "Sesame Street": Oh, hi. Welcome to "Sesame Street." Oh, look what Elmo has, his very own dollar.
PAUL SOLMAN: A new financial literacy initiative from "Sesame Street": money tips for tots, starting with savings.
ELMO (singing): Elmo is going to save every day. It's OK. What a day. Learn to save. Yes, Elmo's going to save.
PAUL SOLMAN: If Elmo's going to save, that would distinguish him from a host of grownup Americans, more than a third of whom have a mere $1,000 or less socked away, in total. Twenty-nine percent of us report not having saved one 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 percent per year. After five years, would you have more than $102, exactly $102, or less than $102? Two percent interest, five years. What portion of the country didn't know that more was the blindingly right answer? Half.
It might explain why 1.5 million Americans filed for bankruptcy last year alone -- no clue, no cushion.
JEANETTE BETANCOURT, Sesame Workshop: The toughest concept is really the idea of starting early around financial education, and particularly the concept of saving.
PAUL SOLMAN: Because, says Jeanette Betancourt of Sesame Workshop, saving is self-control, with which we all wrestle.
JEANETTE BETANCOURT: 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.
PAUL SOLMAN: In Elmo's case, that something is a hotly hyped, irresistible object...
ACTOR (singing): This ball is stupendous.
PAUL SOLMAN: ... a stupendous ball.
ELMO (singing): Stupendous ball.
PAUL SOLMAN: Since commerce on "Sesame Street" runs on a purely cash basis, if you want a stupendous ball, $5 apiece, and you have 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, aged six or so.
How hard is it for you personally to save, instead of spending your money right away on something you want?
GROVER, "Sesame Street": You know, we are not born knowing all these things. No, no, I had to learn them from my friends and my mommy and my daddy. They taught me a lot.
PAUL SOLMAN: Sometimes, people do this test with kids your age. They say, I will give you a marshmallow now, or if you wait a little while, I will give you two marshmallows, but only if you wait.
GROVER: Two marshmallows.
PAUL SOLMAN: Would it be hard to wait?
GROVER: It would be very hard to wait, yes. You know -- you know, just looking at this marshmallow right now makes me want that marshmallow right now.
PAUL SOLMAN: Leaving aside the dubious charms of the foodstuff, the marshmallow test is actually among the most famous and replicated in the history of psychology.
WOMAN: There's a marshmallow. You can either wait, and I will bring you back another one, so you can have two, or you can eat it now.
CHILD: I will save it.
WOMAN: OK, I will be back.
PAUL SOLMAN: The self-control experiment was first run on 600 preschoolers at Stanford University in 1972. Most wolfed down the little pillow of pleasure. But one-third delayed gratification long enough to get another.
WOMAN: You get two! You can eat it.
PAUL SOLMAN: Follow-up research found:
WOMAN: You can eat it now.
PAUL SOLMAN: ... that the more temperate types had hiring SAT scores as teens.
More recently, an ongoing study of 1,000 random New Zealanders from birth to now their 30s yields even stronger findings.
MAN: Those children have become the 1,000 most studied people in the world.
PAUL SOLMAN: Stunningly, their self-control, or lack of it, by age 3, has almost perfectly predicted their future prosperity.
Duke Professor Terrie Moffitt:
TERRIE MOFFITT, Duke University: So, the children who are of very little 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 have got retirement accounts. They own their own homes. And those who are average self-control are right in the middle.
PAUL SOLMAN: Does it correlate with their initial socioeconomic status?
TERRIE MOFFITT: 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.
PAUL SOLMAN: 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.
DAN ARIELY, Duke University: 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. You can think about the amount of political leaders who have taken dramatic falls over immediate temptations.
PAUL SOLMAN: As for "Sesame Street"'s new push:
DAN ARIELY: The idea of getting kids to go into the habit of saving earlier than we currently do, and that you're giving them some rules of thumb about what's appropriate, is incredibly important.
PAUL SOLMAN: 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.
DAN ARIELY: Amet, what's your favorite TV show?
BOY: My favorite TV show, "Power Rangers Samurai."
PAUL SOLMAN: Ariely tries to counter the culture by nurturing self-control.
DAN ARIELY: 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"?
BOY: Two shows later.
DAN ARIELY: OK. Amet, if that's your choice, go and do your homework now.
PAUL SOLMAN: Eight-year-old Amet, about Grover's age, dutifully trudges off.
It's Netta's turn. At four, she's about Elmo's vintage.
DAN ARIELY: 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?
GIRL: Play for a long time.
PAUL SOLMAN: A daughter of Dan Ariely, Netta has already learned the key lesson.
DAN ARIELY: OK, so go and clean now.
DAN ARIELY: Come on. Go and clean. You said that is what you prefer.
PAUL SOLMAN: Ah, so here we have -- this is not a hypothetical.
PAUL SOLMAN: Once you make it concrete...
DAN ARIELY: 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.
PAUL SOLMAN: Difficult, but essential, says psychologist Terrie Moffitt.
TERRIE 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.
PAUL SOLMAN: And avoid the siren songs of the world's increasingly crafty pitchmen.
DAN ARIELY: The people who are 50 now will have an even harder time dealing with temptation than you and I are.
PAUL SOLMAN: You think?
DAN ARIELY: Yes. I'm certain, right, because as technology develops, what is technology going to do? Technology is going to help them delay gratification or have more things to spend their money on now?
PAUL SOLMAN: So, are the brains of most of us now overmatched by the brains of some very able people who have an incentive to get us to act in the here and now?
DAN ARIELY: 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.
PAUL SOLMAN: And that, of course, is where "Sesame Street" comes in. Elmo works various jobs to come up with his $5 for the stupendous ball.
JEANETTE BETANCOURT: 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.
PAUL SOLMAN: In the end, Elmo earns the five bucks, but then shares a dollar with his literally irrepressible pal, Cookie Monster...
COOKIE MONSTER, "Sesame Street": Me no have cookie.
PAUL SOLMAN: ... for more than 40 years, an icon of excess...
COOKIE MONSTER: Me really want cookie.
PAUL SOLMAN: ... reminding us that, though restraint may be the key to prosperity...
ELMO: Here's $1 for a cookie.
PAUL SOLMAN: ... financial and otherwise, it's a daunting challenge, for Muppet and man alike.
EMILIO DELGADO, Actor: Hey, Elmo, that was really a nice thing you did.
ELMO: Oh, thanks, Luis.