There seems to be strong evidence that there is a connection between mathematical thinking and financial decision making. In a recent study conducted by the Federal Reserve Bank of Atlanta, for example, the researchers connected individuals’ “numerical ability and economic literacy” with their likelihood of defaulting on a subprime mortgage. To assess individuals’ numerical ability, they used a quiz like this.
The question that brings up for me is: how do we use the classroom setting to help prepare students to make informed and thoughtful financial decisions? In the context of financial education, I think we need to look to problem solving as an important tool to model and make financial decisions. Problem solving in this context means we want students to learn to articulate and see: the problem, their options, their assumptions about the behavior and outcome they want, and to then explore the paths to get to their desired outcome and choose from among those paths recognizing the trade-offs they may be making. As we explore this type of problem solving with students, it’s important to stress that based on the given problem, individuals options may vary and thus their potential solutions might as well.
I love this definition: “Problem solving in this context means we want students to learn to articulate and see:
* the problem,
* their options,
* their assumptions about the behavior and outcome they want,
* to explore the paths to get to their desired outcome and choose from among those paths recognizing the trade-offs they may be making.”
I love how so much of the process occurs before the actual “work” of getting to the desired outcome. It reminds me of Polya’s 4 stages of problem-solving, but seems to have its own flavor. Didn’t Polya have:
* understand the problem
* identify a strategy
* work on the strategy
* check (in a variety of ways)
I think it makes sense in financial literacy that a) you have a specific moment for thinking about assumptions, and b) that you don’t check your work so much as you try to get it right the first time. It is $ we’re talking about after all! Finally, I think it’s cool that understanding the problem and exploring options do map on kind of nicely to understanding the math problem and choosing a math strategy to explore.
I wonder if Steve’s CFO brother-in-law would describe his basic problem-solving process this way?
Max