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Why a Lesson in Money Plus Math Equals Financial Stability

Video: Sheila Bair and Paul Solman talk about how simple math and financial education, like the savings lessons in her children’s book ‘Rock, Brock, and the Savings Shock,’ might have helped avert the financial crash.

Making Sense

Sheila Bair, known for her tenacity and contrarian tenure as chairwoman of the FDIC, has a message she wants everyone to learn:

Don’t buy an inflatable moose head for your wall.

Some context, lest this interior decorating advice seem slightly out of place for a business and economics page: Bair, now senior advisor at Pew Charitable Trusts, believes much of the financial crisis could have been averted (or, at the very least, diminished) by money-and-math education.

Sheila Bair

“I think we would not have had as big a problem if policy makers had been more numerate,” Bair told us recently. “I’ve been a regulator all my life and I’ve seen a lot of bad things happen to consumers. And some that they’ve imposed on themselves.”

Americans are in deep financial distress. As consumers, we’re in debt to the tune of $2.45 trillion. And the Federal Reserve estimates 60 percent of families saw their wealth decline from 2007 to 2009, the most recent data available.

Investors not doing their homework, loan brokers with financial incentives to push as many mortgages out the door as possible, pay-day loans, subprime mortgages — all were in Bair’s eyes exploitive. Learning simple money principles at an early age would have helped people resist them.

“Money and math skills go together quite closely. And for many kids it would perhaps be a more meaningful education because later in life, most of us are not going to be mathematical engineers or use sophisticated math in our careers. But we will all have personal finances to manage.”

Paul Solman

Which brings us back to the inflatable moose head. Bair points to the short-termism (that ‘I have to have this now’ feeling) of many consumers and policy makers as a precipitator of the crisis. So she wrote the children’s book ‘Rock, Brock and the Savings Shock.’

“Educational materials need to focus on resisting those urges for instant gratification and focusing on the long term of, ‘what’s meaningful to you, what do you want?’ This is a cultural problem and hopefully the lesson of ‘Rock and Brock’ is think for the longer term.”

In the book, twin brothers Rock and Brock are given a dollar each week from grandpa for doing chores. If they’re good and save their dollar, gramps will double their savings at the end of the week. If they spend it, they get just one buck again. Thus, the lesson: savings grow.

Children listening