Financial literacy can come from some unexpected places -- even the town of Springfield. West Virginia University's Joshua C. Hall proved this with a recent research paper: HomerEconomicus: Using The Simpsons to Teach Economics (PDF file).
In his paper, Hall cites an episode where Bart Simpson wins an elephant named "Stampy" in a radio contest. Bart starts making money by charging people in the neighborhood $1 to see the elephant and $2 to ride it. This gets Homer very excited:
- Homer: Look at this, Marge: $58 and all of it profit! I'm the smartest businessman in the world.
- Marge: [The elephant's] food bill today was $300.
There's a critical lesson right there for young people -- not to mention the Internet companies that went belly-up a few years ago: To really make money, you need to take in more than you spend.
Homer ups his prices to $100 to see the elephant and $500 to ride it. The interested crowds disappear. His blunder helps to illustrate price elasticity and the relationship between price and demand.
Meanwhile, there are other bills besides food. After Stampy eats much of a local arboretum, expenses such as chains enter the picture. Homer approaches Bart:
- Homer: Well these bills will have to paid out of your allowance.
- Bart: You'll have to raise my allowance to about $1,000 a week.
- Homer: Then that's what I'll do, smart guy.
Another interesting angle in this episode is that Bart was initially offered a choice between $10,000 or the elephant. His dad had the right instinct, but exhibited a poor grasp of math, while his mom Marge exhibited excellent money-saving sense:
- Homer: Bart! With $10,000, we'd be millionaires! We could buy all kinds of useful things like ... love!
- Marge: Or double-ply windows. They look just like regular windows, but they'll save us 4% on our heating bill.
You should be able to see by now that a single well-chosen episode of a television show can impart many financial lessons.
What might have been
If this episode had aimed to teach financial literacy more than it aimed to make us laugh, it might have spent some time exploring how $10,000 could have been a far more prudent prize than a gigantic elephant.
Consider, for example, a fund recently recommended in our Motley Fool Champion Funds newsletter. It's racked up an average annual gain of nearly 12% over the past five years, topping the S&P 500 by almost six percentage points. The fund's top holdings recently included Hansen Natural
If the Simpsons had invested the $10,000 in some funds or stocks that averaged 12% growth, their money would have tripled in a decade, and grown to more than $170,000 in 25 years. That may not be Monty Burns-level wealth, but it beats keeping an elephant in the local arboretum.
Support financial literacy
One way or another, I encourage you to support financial literacy. You might simply spend some time talking about money with your teenager, or even with co-workers -- perhaps while you watch some television together. Since few of us ever learn much about money in school, most of us still have a lot to learn.
You might also consider learning more about our annual charity drive, Foolanthropy. Click in to meet five impressive organizations, one of which is devoted to increasing financial literacy in America. (The others are pretty nifty, too.)
If you'd like to make some young people you care about more financially savvy, you'd do well to send them to our Teens and their Money nook. Alternatively, consider giving them a copy of our well-regarded Motley Fool Investment Guide for Teens book (check out its reviews on Amazon.com).