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'Striking weaknesses' in adult financial skills

120 points by onuralp 9y ago

dmoy 9y ago
Initially I figured this isn't testing the sort of financial skills that are really useful for adults. But, then I now guess that the skills that are important are probably more complex, so this is a pretty good proxy. Doesn't paint a good picture.
volgo 9y ago
Some of the skills tested in the study seem more like arithmetics rather than financial skills: - "About a quarter could not work out how much change they should receive from a shop..." - "About one in three adults struggled to work out the price they had to pay.. per litre or per kilo" - "About half could not read a simple financial line graph" - "Most struggled to calculate discounts involving more complex calculations" I mean.. people can't do math in their head. Who cares? In my opinion, the most important financial skills are simple things like monitoring your credit, your spending, creating a budget, pay off credit card in full, pay down high interest debt ASAP, avoid pay day loans, don't spend money on stupid things, invest in high quality index funds, etc. These skills are mostly psychological and will help your financial health WAY more than calculate price of chicken per pound in your head.
- hammock 9y ago
  How are you supposed to monitor your spending if you cannot figure out how much you paid for chicken?
  - Kuiper 9y ago
    You don't need to "figure out" how much you paid for chicken; it's printed on the receipt. The only thing to "figure out" is "what's the cost per pound if I paid $7 for a 2.3 pound chicken" and maybe you want to do that arithmetic, but for a lot of people, "this chicken cost $7 and I estimate that it will feed me and my partner for maybe 2-3 meals" is the only 'calculation' that needs to happen. Larger calculations like "how much did I spend last month on groceries" are easily assessed simply by looking at a credit card statement. Being financially responsible does not necessarily entail knowing the exact dollar-to-calorie or dollar-to-weight ratio of every item in your shopping cart.
    - sambe 9y ago
      If you can't make basic calculations with ratio and percentages, it seems unlikely that you can compare different costs per unit weight/volume or do the maths to figure out how much food you need without waste. Yes, you can look at a chicken and say "that's enough for 3 people". Yes - in the UK - it's quite likely (legally required?) that all products are labelled per 100g or per kg (although I'd contest people failing these tests are likely not to be understand or care for that labelling). It's a tough argument to make that these skills have no impact on on budgeting at all.
  - MaulingMonkey 9y ago
    Not by counting pennies. Estimate, get a rough order of magnitude - things you can actually keep in your head and get an intuition for instead of math to maybe forget in a checkbook somewhere if you record the calculation at all. Check your balances. Savings going up is good, savings going down is bad. If you need to get detailed, or your estimates don't line up with what your savings account is actually doing, you can also harness the power of online banking records do half the work for you. I semi-recently went over three quarters worth of transactions and aggregated them by category: "Food", "Home Expenses", "Car Expenses", "Food", "Health", "Shopping", "Subscriptions", "Charity", "Unknown". (Not well covered by this exercise alone but easy enough to add to account: taxes.) This already was overkill for me. I did nothing but fact check my gut (which was wrong on some details but right on all the macro points that actually mattered - rent, living expenses, and entertainment - exactly as you'd expect with estimates.) Monitoring total spending already tells me I'm where I need to be - with a good rainy day fund, a good savings fund growing at a good rate. Chicken? Don't know don't care. Food totaled bellow my estimates, which were already low enough I didn't feel them worth the opportunity cost of trying to optimize. That time would be better spent learning how to better negotiate raises and hiring, or learning new career skills. Unknown? Ditto. I happened to subdivide "Food" a little when initially categorizing out of ease and curiosity into "Groceries", "Caffeine", and "Eating Out". Could've saved $633.45 between 1/1/2017 and 8/16/2017 by not buying caffeine, didn't use a lick of manual arithmetic to figure that out. Computers did it for me, and it probably wasn't worth the electrons to even do that.
    - smallnamespace 9y ago
      > If you need to get detailed, or your estimates don't line up with what your savings account is actually doing I think the point is that the ability to count pennies when called upon is part of what keeps your rough intuitions properly calibrated. If one literally cannot do exact arithmetic when necessary (whether mentally, manually, or with a calculator), then how does the gut learn what to pay attention to, and when it might be wrong?
  - scarface74 9y ago
    This reminds me of the myth of the "Latte Factor". http://www.slate.com/articles/business/the_united_states_of_debt/2016/05/the_latte_is_a_lie_and_buying_coffee_has_nothing_to_do_with_debt_an_excerpt.html http://www.slate.com/articles/business/the_united_states_of_...
    - sokoloff 9y ago
      It's an exaggeration more than a myth, IMO. It's directionally correct, meaning no re good would be done by people considering it than ignoring it.
      - scarface74 9y ago
        What instead of the "Latte Factor", they said... - buy a house that is well below your means or even move some place where your cost of living compared to your money earning potential is favorable. -Get a degree in something that can make money instead of a BS in Ancient Chinese Art History. -Don't go into debt getting a degree from a prestigious college to be a high school teacher. Go to a cheap state school. -Buy a car and keep it for longer. My family spends money on a lot of little things that some people would think was frivolous but we also bought a house in the burbs that had a mortgage that was less than 20% of our monthly net income, we don't drive expensive cars, or try to keep up with the Joneses. My wife still brags about how much money she saves shopping at the thrift store and I'm always looking for a bargain because I don't care about the brand of clothes. On the other hand, I'm very aggressive about my salary and told my (step) kids to pursue careers (or trades) that had income potential. In other words, it's not the little decisions you make that make a difference it's the big ones. You can only by definition, cut spending by so much, but you can make choices to make more money. After we got married about six years ago, my wife and I by working together have increased our income by 33% by her taking a job that has good benefits but low pay (that she enjoys) that gave me the flexibility of aggressively changing jobs for higher salaries without worrying about benefits.
        watwut 9y ago
        Majority of students go for practical or practically sounding degrees. And those who dont are clustered among students from more rich families. The "students are choosing impractical degrees" is just a way to ignore actual economy problems and blaming result on students.
- Kuiper 9y ago
  Especially when you consider that most supermarket labels will also include the "price per unit weight" or "price per unit volume" on the shelf with a smaller font, it becomes trivially easy to compare which bottle of soap is going to get you the most for your money. Or maybe you neglect to do this (simply opting for the container that looks the most appealing rather than optimizing for the amount of liquid per dollar you'll receive) and as a result you have to suffer the catastrophic consequences of spending $9 per month on dish soap when you could have spent $7.20 instead. The funny thing is that some of the asked are all arithmetic are constructed in such a way that you will get a "wrong" answer if you treat them as practical financial questions as opposed to purely arithmetic ones. For example, one of the sample questions in the article is "If a litre of cola costs $3.15, how much will you pay for a third of a litre?" This seems to be asking you to take $3.15 and divide it by three, but as a practical matter, it would be folly for me to take the price of a 20 oz soda bottle and then assume that I could calculate the cost of a 12 oz can simply by multiplying by 0.6. This question isn't a test of practical or financial literacy; it's purely arithmetic.
  - _ah 9y ago
    I've started noticing some sneaky math in my local supermarket. When comparing two items, both list the unit price, but they list the price in different units. Example: A 1.4-lb package lists the price per oz, while the 0.8-lb package lists the price per lb. In every case, the intent seems too be an attempt to induce math errors and cause someone to accidentally purchase the package with the higher true unit price.
    - fnord123 9y ago
      Just multiply or divide by 10s or 100s or whatever. It's not hard. Oh.. oh yeah. ;)
      - walshemj 9y ago
        That's not going to work with imperial units :-)
- sergioisidoro 9y ago
  This! I'm horrible at mental arithmetics and I have a degree in engineering. Everyone has access to a calculator in their pocket anyway, and ... Who's going to pay with cash within a couple of years? To add to what you said: I think explaining basic concepts is the way to go: Explain compound interest, how much 1$ today will be worth in their retirement at a fixed rate. How does money devalue with inflation, and other basic personal finance aspects. But above all, give people the intuition rather than just say "you should invest your savings"
- grondilu 9y ago
  > I mean.. people can't do math in their head. Who cares? I kind of agree. I guess I can answer to the first question : "If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get?" but to be honest, it would take me an embarrassing long time to do it, and in the end I could very well have made a mistake. Don't get me wrong : mental calculus is an awesome skill and it so happens that I have lately been trying to improve in this regard. But the fact that not everybody masters this art should not be a surprise.
  - gknoy 9y ago
    My reply would be "around five dollars, and if you want more let me whip out my phone's calculator". :D Now that I use a calculator, the tea adds up to just under $14, lower than my estimate of 15, but the taxes we non-Oregonians pay end up bringing it to a bit over $15. `sum(ceiling(price))` seems to be a useful way to estimate when the prices are small.
    - antisthenes 9y ago
      Hah, the tax calculation almost certainly would mean that I would get it wrong! I would have given the plain arithmetic answer.
- mbesto 9y ago
  > like monitoring your credit, your spending, creating a budget, pay off credit card in full, pay down high interest debt ASAP, avoid pay day loans, don't spend money on stupid things, invest in high quality index funds, etc. IMHO this all starts with the fact that many people I've encountered simply do not understand the difference between income and assets. In fact, I run into this all of the time on HN with people here who say "I can't believe that's a billion dollar business". I would love for them to do this experiment and ask the common person what the Time Value of Money is. I bet the results are way worse. I'm convinced that there are serious externalities to all of the financial innovation that has happened in the last 40 years that we simply choose to ignore and it hurts the common man.
  - pge 9y ago
    I think the Time Value of Money is one of the most important concepts any lay person should understand but most don't. I came out of college (an Ivy league school) as a physics major with zero understanding of finance. At my first job, one of the first things my boss asked me was, "What would you pay me today in exchange for me paying you $100 in one year?" That, of course, led to a lesson on the time value of money. Not a difficult concept to grasp, but despite a great education, I had never had an occasion to think about it and understand it. Once you get that concept, everything else about finance and investing is pretty straightforward. I wish every high schooler had a basic finance course that started with that same question. Then moved on to personal finance basics like understanding interest (credit cards, car loans, mortgages, etc) and net worth (assets) v. income.
    - toomuchtodo 9y ago
      There is a great set of Khan Academy videos on the subject. https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/present-value/v/time-value-of-money https://www.khanacademy.org/economics-finance-domain/core-fi...
  - candu 9y ago
    In the US, at least, this is possibly because a not-insignificant number of people have zero or even negative net assets: https://en.wikipedia.org/wiki/Wealth_in_the_United_States https://en.wikipedia.org/wiki/Wealth_in_the_United_States It's hard to comprehend something you've never had (or, in some cases, even imagined you could have). I have friends who live paycheck to paycheck. For them, budgeting, saving, investing, long-term financial planning, etc. are completely foreign ideas. Part of this is an intergenerational legacy of poverty: their parents weren't in a position to think about these things either, so they were never raised to think about it - and so, like many North Americans, they spend money they don't have on things they don't need, work punishing hours at close to minimum wage to make up the difference, and are left with no time / energy afterwards to learn better. To compound the issue: even if they did have the time / energy to learn better, they can't secure the kind of credit that would enable them to quickly pay off their high-interest debts. It's deeply frustrating to watch, but this is what one step above abject poverty looks like. You have a lot of (well-meaning!) people telling you "just do X", without realizing that X often requires you have up-front capital, good credit, spare time, or any of the other things people in more stable financial situations take for granted. (I've been that person a few times, advising them to do things that to me are common sense - only to find out that, for them, those "common sense" steps are impossible.) In that sort of environment, it's meaningless to ask someone what the time value of money is; they have more serious structural problems with their finances that no amount of high-level philosophizing will solve.
- noufalibrahim 9y ago
  While your point is literally true, having basic arithmetic proficiency does go some way in making sense of the world. Quick mental calculations to see when you'll reach a certain place, ability to compare things when they're in different units etc. It's not only the skills but the overall mental model that they help create. The world starts to become a little more rational and sensible when you can do this.
  - stagbeetle 9y ago
    Tell that to every maths teacher. "Show your work" was a nightmare.
    - noufalibrahim 9y ago
      As a kid, it was. As a secondary level student, I found it useful sometimes to write things out in detail when I was stuck and all the mental models I had didn't work. Good maths teachers can tell the difference and in my case, often did.
- walshemj 9y ago
  Id agree it would be more useful to understand your jurisdictions tax system and basic things about the stock market works ie what is a p/e ratio - how the bond yield curve works etc.
- erikb 9y ago
  Yes and no. Yes certainly the skills you describe are more in the financial category and help more, if you need to choose. But one really should be able to do both monitoring and simple calculations in one's head, at least getting into the range of the actual result. If you pay your single chicken leg with a $50 note and don't expect "more than $40 change" in return, then this can be bad for your finances as well.
- tboyd47 9y ago
  Anything involving the stock market is far from simple. And "don't spend money on stupid things" is more class signaling than financial advice. Who decides what is "stupid?" If it's important to you, why not estimate how much of an impact the purchase will have on your budget, and decide based on that? That requires math. I dunno, I do arithmetic in my head just about every day. I can't imagine engaging in any sort of business transaction without that skill. Even just going to the grocery store, not being able to round, add, and multiply, means you're always going to be surprised at the cash register. I'd much rather know how much I'm going to spend before I get to the cash register so I don't look silly asking them to put things back for me.
  - hitekker 9y ago
    > "don't spend money on stupid things" is more class signaling than financial advance. If it weren’t for the sneering tone of the GP, the advice could have been meant as “don’t buy transient things that are beyond your means”
    - tboyd47 9y ago
      That proves my point even further. The "beyond your means" part is where math starts being needed again.
  - skybrian 9y ago
    I think what we're seeing here is a class difference? For some people, if the grocery bill is higher than expected, you just shrug and try to do better next time.
    - sangnoir 9y ago
      > For some people, if the grocery bill is higher than expected, you just shrug and try to do better next time. I knew I had crossed some class boundary when I found myself not paying close attention to the running total at checkout. There is a difference in mindset for people whose budgets are rounded to the nearest $1, $10 or $100 respectively.
- MR4D 9y ago
  I’m not sure whether your comment was serious or not. If you can’t figure out change in your head, nothing will help you be able to budget. After all, budgeting can be looked at as a more complicated version of calculating change (albeit from a paycheck). And of course, without a good budget, your credit won’t be good, etc.
jandrewrogers 9y ago
These aren't even "financial" skills but a lack of basic arithmetic ability. It is a failure of the education system. I expect if we tested for actual financial skills the results would be even worse, as that requires some domain knowledge beyond basic arithmetic. I'm not sure this is easily fixable; most people I know have a very limited interest in understanding financial maths.
- AnIdiotOnTheNet 9y ago
  I don't think the education system is at fault. Mental arithmetic is a skill you need to practice, and since a lot of us either spend a lot of time at a computer or always have one in our pocket, why would we?
  - hackerman12345 9y ago
    Here are the questions, if you can't get them correct without a computer handy, than your education is suspect. I would expect them to appear in a 3rd grade math book. 1. If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get? 2. If a litre of cola costs $3.15, how much will you pay for a third of a litre? 3. If a football club offers the same discount for all season tickets - Main Stand - $50 for single entry, $300 for a season; Stand 2 - $35 for single entry, $210 for a season; Stand 3 - $25 for single entry, $150 for a season - what would the price be for a Stand 4 season ticket, where a single entry costs $21? The answers are $6.10, $1.05 and $126 respectively.
kartan 9y ago
If you want capitalism to work, you need some kind of "homo economicus" that is able to look for their own selfinterest. If what you have is companies powered by complex financial systems and artificial intelligence help while consumers are not able to get a discount right, you are going to end with all money in one side of the table with the other empty handed. This is another reason to improve our education systems. We need to function in an increasing complex society and that requires an incresing education quality with more resources, better methologies and more time dedicated to build knowledge and less to build national identity. (To memorize the list of presidents is not as an useful skill as it used to be, I guess).
- tysonzni 9y ago
  what you have is companies powered by complex financial systems and artificial intelligence help while consumers are not able to get a discount right Yeah agreed. Perhaps products (chatbots, voice?) that simply tell people what to do can partially solve for this. In many cases however, people have self-interests based on vastly different values (think relationship or hobby), and their instincts are good enough at approximating what they want. And while personal finance is tricky for many folks, not every decision is like personal finance which has a easily defined value function like calculating compound interest or choosing discounts. So my view is people are usually right!
  - pjc50 9y ago
    "Alexa thinks you should apply for a personal loan through Amazon Finance" Yeah, no conflict of interest there
    - undreren 9y ago
      Capitalism is great for the many when most business are small and there's plenty of competition. Capitalism is great for the few in more or less all other scenarios. We live in one of the others, I'm afraid.
- shaki-dora 9y ago
simula67 9y ago
This study does not mention whether the participants where asked to do the arithmetic in their head : https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx https://johnjerrim.files.wordpress.com/2018/03/piaac_working...
John_KZ 9y ago
They don't control for age, so their study is worthless. Many of the countries mentioned as "the worst" have ageing populations and lots of emigrants.
- erikb 9y ago
  I hope you really mean "emigrants", so smart people leaving their home countries, leaving the aging population that was not capable of going abroad. And I think people downvote because they assume you mean "immigrants" being stupid and thereby decreasing the average IQ in countries with lots of immigrants. The second statement I would also downvote, but until I'm convinced of the opposite I assume you mean the first.
  - John_KZ 9y ago
    Ah, that makes sense. I did mean emigrants. Emmigration and immigration have no correlation with IQ regardless. The lever of education sometimes does dictate who migrates (due to legal requirements or financial motivation for example), but the paper requires only basic arithmetic so it wouldn't have much of an effect anyway. At this point I'm used to getting downvoted for no obvious reason so I don't even bother to ask why.
    - erikb 9y ago
      My experience is also that the randomness increased over the recent years. That also means sometimes I get 40+ points for something that wasn't even worth one upvote in my opinion.
juskrey 9y ago
Results show clearly that those skills are not necessary for prosperity
- alimw 9y ago
  But for those already poor, their lack will matter more.
- erikb 9y ago
  Which results? Some rich people stay rich by getting gifts from their daddies, by being mean and by having other people do the calculations for them. Doing it this way one might even become president. But I think you won't find anybody that got to prosperity without it. Even the meanest of exploiters need to calculate their money and check their balances.
waldfee 9y ago
It bugs me that the list of countries isn't sorted. Who does that?
- sleet 9y ago
  See page 26 of the report: https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx https://johnjerrim.files.wordpress.com/2018/03/piaac_working...
bramjans 9y ago
Having lived for a while in Chile (where according to the article financial literacy is below average), my experience very much agrees with this. I noticed many people struggling with basic arithmetic resulting in me having to check the change at small shops since it would often be wrong. It also leads to people making crazy decisions with respect to choosing to buy in cash or on credit (in quota). I'm not talking about household appliances that people need, but I've seen things like a person buying a 50$ blanket in 12 installments over a year. Many people would just fill up they're salary with monthly credit payments. I've heard some people say this shouldn't be an issue with most supermarket labels including the "price per unit weight/volume". I agree this should be an obligation by law, but I feel like many people are unaware of these labels. I know it sounds crazy to a tech crowd but I'm sure many people don't compare the weight/volume with the price but instead go for the cheaper product price.
- Double_a_92 9y ago
  > labels including the "price per unit weight/volume" We overestimate the average person. Not everybody knows what that even means. They just don't have a concept of ratios that can be compared. > go for the cheaper product price. That might still be a valid option if the packaged quantities differ my a lot. E.g. if I only need 100g of ham for a sandwich, it's not better to buy a whole 1kg piece if that's just going to rot in my fridge.
  - AnIdiotOnTheNet 9y ago
    I don't think we overestimate people necessarily, I think we overestimate how much they desire to spend their time thinking about the same things we do.
baybal2 9y ago
Basic arithmetics is not the only deficient field in UK secondary school math curriculum. Higher tier domains like statistics, calculus, trigonometry, geometry, vectors, math analysis are deficient too.
- walshemj 9y ago
  STEM qualifications aren't considered very highly in the UK
  - throwawayts 9y ago
    The Times Higher Education rankings puts 3 UK universities in the top 10 worldwide for physical sciences and for engineering. Or do you just mean they aren't considered attractive careers to students and children?
    - walshemj 9y ago
      I meant socially those in the stem professions are looked down on.
      - smcl 9y ago
        By whom? I have not experienced this at all. STEM jobs are by UK standards well paid and would be considered solid respectable to enter by everyone I can think of. Unless you're comparing the salaries in these to those of Bankers ... but that's a whole different kettle of fish, and there's the added complication that Bankers are actually actively disliked by an overwhelming majority of the population.
        walshemj 9y ago
        No actually real science jobs are paid appallingly I know what say the STEM grades in the civil service are paid. And even developers are paid badly when compared to our peers in the states and with other professions in the UK. Compare what google pays in London to what it pays in say Kansas I could buy a house there (Kansas) out if my cash savings You do know that the train driver on my commute to London is paid £60k for a 4 day week and most of them after overtime are on >£75k with a DB pension! The UK has been known for decades as a place to get good engineers cheap.
crdoconnor 9y ago
>Examples of the sorts of questions asked > >1. If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get? Put yourself in the mind of somebody taking this questionnaire. Do you actually care if the answer is correct? Will you lose money if you get the answer wrong? Are you in a hurry to finish the questionnaire and go and do something else? Now put yourself in the mind of a lobbyist who represents utilities companies, financial services companies and HMOs. Your customers have all come under fire because they have needlessly complicated pricing structures designed to confuse people. This is a very profitable practice so they want to continue doing it, but they'd like to draw attention away from it. Regulators sometimes come under political pressure to do something about it (among others, Elizabeth Warren has put this kind of pressure on, and they hate her for it). If, as a lobbyist, if you get others to reframe the issue as one of "lack of financial literacy" it helps take the heat off your customers. However, It's all very well saying "people just need to become more financially literate!" but that wouldn't sound very convincing coming from a lobbyist representing a company that has a financial stake in everybody believing it. Therefore, it's better to be able to get your media contacts and politician friends say "studies say people need to become more financially literate". There is, as such, a demand for studies like this. And, Aditi Bhutoria, John Jerrim and Anna Vignoles happily (although possibly unknowingly) filled this demand by giving a bunch of random, disinterested people a math quiz where it didn't matter if they got the answers wrong and calling it "science".
NiklasMort 9y ago
That's hardly news, nor surprising given its done systematically on purpose. Imagine people would be aware of how they are being ripped off by the financial systems...that'd be bad. There is a reason why finance basics or general life skills are not taught in schools (no matter if US or EU). Sure you maybe learn how to calculate interest but that's probably about it.
RickJWagner 9y ago
I absolutely believe it. Warren Buffet is working to fight this, he's made a series of "Secret Millionaire's Club" videos designed to educate kids about money. I think it's a great program.
amichal 9y ago
At a local Starbucks the other day the person working the register insisted the quarter(25c) I gave him was nickle(5c). Later when giving me 16c in change he gave me a quarter and a penny. At McDonalds the next day I was refunded for a 4.67 order that took too long with 5.50 cents. My experience matches the article. On a more serious note: We design software for use by finance experts. After user testing we’ve had to: - remove error bars from charts because folks didn’t know what they were and found the concept confusing - remove histograms (users didn’t know what they represented). - remove “percentile” after no one could agree if 99th perctile was higher or lower then 1st - eventually change rankings from “3rd” to “3rd highest score out of NN respondents”
- giardini 9y ago
  amichal says>After user testing we’ve had to:... - remove “percentile” after no one could agree if 99th percentile was higher or lower then 1st..." IIRC studies show that people comprehend natural frequencies (e.g., "10 of every 1000 women have cancer") more easily than they do percentages ("1% women have cancer").
- ApolloFortyNine 9y ago
  I actually have had the same thing happen at McDonalds, sometimes they seem to just not have a receipt for you so they give you whatever they feel like. It's always been more than I paid, but it is kinda like "you had one job." Supposedly if you pay with cash some cashiers pocket the cash and give you change from their own pocket, so maybe that's what happened here.
- pc86 9y ago
  I have a hard time seeing how you can be a "finance expert" and not know what an error bar or histogram is.
TorKlingberg 9y ago
I appreciate that the BBC links to the original study. The tables and figures are all at the end: https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx https://johnjerrim.files.wordpress.com/2018/03/piaac_working...
poster123 9y ago
One argument against redistribution is that one is taking money from high-IQ, more responsible people who know how to manage money on average and giving it to low-IQ, less responsible people who don't know how to manage money. This needs to be balanced against the primary argument for redistribution, that someone earning $30K/year can use an extra $1K more than someone earning $300K/year wil l miss it.
- folli 9y ago
  To follow this line of thought, you're then advocating for heavy inheritance taxation? A heir of a multi-billion dollar fortune is not more likely to have an above average IQ or be more responsible, so he should start from scratch as does the average Joe?
  - poster123 9y ago
    Billionaires are smarter, more hardworking, and ambitious on average, and there is likely some genetic competent to each of these qualities. Certainly there is for IQ. Is your guess for the average IQ of Bill Gates' children 100? I'd guess say 130.
    - AnIdiotOnTheNet 9y ago
      Exactly the same reasoning can be used to justify monarchy.
      - pc86 9y ago
        Monarchy is fine as long as you elect the monarch every few years.
apo 9y ago
Some will look and this and say, "big deal, people can't do math in their heads." There may be more to it. Consider the recent "riddle" in which a man buys a horse, sells it, and buys it back again, then sells it. The question is, how much money did the man make or lose: http://www.independent.co.uk/news/science/math-riddle-quiz-question-man-buys-a-horse-viral-a8221136.html http://www.independent.co.uk/news/science/math-riddle-quiz-q... It was so simple to me that it seemed like it must be a trick question. It's not. I asked this question to people I was certain would get the right answer - and they didn't. This is a deep topic that needs to be explored much more thoroughly than it might appear on the surface. I suspect that many of the people who can't do this kind of reasoning are running companies and countries.
- arkryne 9y ago
  I had a really funny experience trying that problem. As I began reading it, I developed a strong desire to glean over it and 'just get done with it' and felt a distracting buzz in my mind. I enjoy studying maths and doing proofs myself but I got this basic questions wrong. I just went'ugh, started with 60 spent, ended up selling for 90' and I went wrong with it. The point is, I felt a strong aversion to word problems and such, which I think remind me of riddles which always trump me. Therein lies the desire to 'just be done with it' and the underlying aversion to maths I think other people also have.
  - AnIdiotOnTheNet 9y ago
    It's because word problems are nothing but obfuscation. Here's the same problem written out in conventional mathematical notation: (-60 + 70) + (-80 + 90) Boy, that's pretty straightforward isn't it?
- digi_owl 9y ago
  I wonder how many would struggle if it was presented simply a 0-60+70-80+90=? rather than the block of text in the article. At least for me the problem is that when i get a block of text like that i get distracted from the math by scrutinizing how everything is worded, in case there is a trick question.
- 9y ago
9889095r3jh 9y ago
After reading 'Thinking Fast and Slow" by Daniel Kahneman, I'm not surprised people can't calculate their bill and determine change in line at the super market. Solving math problems like that requires deliberate focus and effort. Nobody has the time or energy to do that on line at the supermarket. Most probably estimate.

120 points by onuralp 9y ago

dmoy 9y ago

Initially I figured this isn't testing the sort of financial skills that are really useful for adults. But, then I now guess that the skills that are important are probably more complex, so this is a pretty good proxy. Doesn't paint a good picture.

volgo 9y ago

Some of the skills tested in the study seem more like arithmetics rather than financial skills: - "About a quarter could not work out how much change they should receive from a shop..." - "About one in three adults struggled to work out the price they had to pay.. per litre or per kilo" - "About half could not read a simple financial line graph" - "Most struggled to calculate discounts involving more complex calculations" I mean.. people can't do math in their head. Who cares? In my opinion, the most important financial skills are simple things like monitoring your credit, your spending, creating a budget, pay off credit card in full, pay down high interest debt ASAP, avoid pay day loans, don't spend money on stupid things, invest in high quality index funds, etc. These skills are mostly psychological and will help your financial health WAY more than calculate price of chicken per pound in your head.

hammock 9y ago
How are you supposed to monitor your spending if you cannot figure out how much you paid for chicken?
- Kuiper 9y ago
  You don't need to "figure out" how much you paid for chicken; it's printed on the receipt. The only thing to "figure out" is "what's the cost per pound if I paid $7 for a 2.3 pound chicken" and maybe you want to do that arithmetic, but for a lot of people, "this chicken cost $7 and I estimate that it will feed me and my partner for maybe 2-3 meals" is the only 'calculation' that needs to happen. Larger calculations like "how much did I spend last month on groceries" are easily assessed simply by looking at a credit card statement. Being financially responsible does not necessarily entail knowing the exact dollar-to-calorie or dollar-to-weight ratio of every item in your shopping cart.
  - sambe 9y ago
    If you can't make basic calculations with ratio and percentages, it seems unlikely that you can compare different costs per unit weight/volume or do the maths to figure out how much food you need without waste. Yes, you can look at a chicken and say "that's enough for 3 people". Yes - in the UK - it's quite likely (legally required?) that all products are labelled per 100g or per kg (although I'd contest people failing these tests are likely not to be understand or care for that labelling). It's a tough argument to make that these skills have no impact on on budgeting at all.
- MaulingMonkey 9y ago
  Not by counting pennies. Estimate, get a rough order of magnitude - things you can actually keep in your head and get an intuition for instead of math to maybe forget in a checkbook somewhere if you record the calculation at all. Check your balances. Savings going up is good, savings going down is bad. If you need to get detailed, or your estimates don't line up with what your savings account is actually doing, you can also harness the power of online banking records do half the work for you. I semi-recently went over three quarters worth of transactions and aggregated them by category: "Food", "Home Expenses", "Car Expenses", "Food", "Health", "Shopping", "Subscriptions", "Charity", "Unknown". (Not well covered by this exercise alone but easy enough to add to account: taxes.) This already was overkill for me. I did nothing but fact check my gut (which was wrong on some details but right on all the macro points that actually mattered - rent, living expenses, and entertainment - exactly as you'd expect with estimates.) Monitoring total spending already tells me I'm where I need to be - with a good rainy day fund, a good savings fund growing at a good rate. Chicken? Don't know don't care. Food totaled bellow my estimates, which were already low enough I didn't feel them worth the opportunity cost of trying to optimize. That time would be better spent learning how to better negotiate raises and hiring, or learning new career skills. Unknown? Ditto. I happened to subdivide "Food" a little when initially categorizing out of ease and curiosity into "Groceries", "Caffeine", and "Eating Out". Could've saved $633.45 between 1/1/2017 and 8/16/2017 by not buying caffeine, didn't use a lick of manual arithmetic to figure that out. Computers did it for me, and it probably wasn't worth the electrons to even do that.
  - smallnamespace 9y ago
    > If you need to get detailed, or your estimates don't line up with what your savings account is actually doing I think the point is that the ability to count pennies when called upon is part of what keeps your rough intuitions properly calibrated. If one literally cannot do exact arithmetic when necessary (whether mentally, manually, or with a calculator), then how does the gut learn what to pay attention to, and when it might be wrong?
- scarface74 9y ago
  This reminds me of the myth of the "Latte Factor". http://www.slate.com/articles/business/the_united_states_of_debt/2016/05/the_latte_is_a_lie_and_buying_coffee_has_nothing_to_do_with_debt_an_excerpt.html http://www.slate.com/articles/business/the_united_states_of_...
  - sokoloff 9y ago
    It's an exaggeration more than a myth, IMO. It's directionally correct, meaning no re good would be done by people considering it than ignoring it.
    - scarface74 9y ago
      What instead of the "Latte Factor", they said... - buy a house that is well below your means or even move some place where your cost of living compared to your money earning potential is favorable. -Get a degree in something that can make money instead of a BS in Ancient Chinese Art History. -Don't go into debt getting a degree from a prestigious college to be a high school teacher. Go to a cheap state school. -Buy a car and keep it for longer. My family spends money on a lot of little things that some people would think was frivolous but we also bought a house in the burbs that had a mortgage that was less than 20% of our monthly net income, we don't drive expensive cars, or try to keep up with the Joneses. My wife still brags about how much money she saves shopping at the thrift store and I'm always looking for a bargain because I don't care about the brand of clothes. On the other hand, I'm very aggressive about my salary and told my (step) kids to pursue careers (or trades) that had income potential. In other words, it's not the little decisions you make that make a difference it's the big ones. You can only by definition, cut spending by so much, but you can make choices to make more money. After we got married about six years ago, my wife and I by working together have increased our income by 33% by her taking a job that has good benefits but low pay (that she enjoys) that gave me the flexibility of aggressively changing jobs for higher salaries without worrying about benefits.
      - watwut 9y ago
        Majority of students go for practical or practically sounding degrees. And those who dont are clustered among students from more rich families. The "students are choosing impractical degrees" is just a way to ignore actual economy problems and blaming result on students.
Kuiper 9y ago
Especially when you consider that most supermarket labels will also include the "price per unit weight" or "price per unit volume" on the shelf with a smaller font, it becomes trivially easy to compare which bottle of soap is going to get you the most for your money. Or maybe you neglect to do this (simply opting for the container that looks the most appealing rather than optimizing for the amount of liquid per dollar you'll receive) and as a result you have to suffer the catastrophic consequences of spending $9 per month on dish soap when you could have spent $7.20 instead. The funny thing is that some of the asked are all arithmetic are constructed in such a way that you will get a "wrong" answer if you treat them as practical financial questions as opposed to purely arithmetic ones. For example, one of the sample questions in the article is "If a litre of cola costs $3.15, how much will you pay for a third of a litre?" This seems to be asking you to take $3.15 and divide it by three, but as a practical matter, it would be folly for me to take the price of a 20 oz soda bottle and then assume that I could calculate the cost of a 12 oz can simply by multiplying by 0.6. This question isn't a test of practical or financial literacy; it's purely arithmetic.
- _ah 9y ago
  I've started noticing some sneaky math in my local supermarket. When comparing two items, both list the unit price, but they list the price in different units. Example: A 1.4-lb package lists the price per oz, while the 0.8-lb package lists the price per lb. In every case, the intent seems too be an attempt to induce math errors and cause someone to accidentally purchase the package with the higher true unit price.
  - fnord123 9y ago
    Just multiply or divide by 10s or 100s or whatever. It's not hard. Oh.. oh yeah. ;)
    - walshemj 9y ago
      That's not going to work with imperial units :-)
sergioisidoro 9y ago
This! I'm horrible at mental arithmetics and I have a degree in engineering. Everyone has access to a calculator in their pocket anyway, and ... Who's going to pay with cash within a couple of years? To add to what you said: I think explaining basic concepts is the way to go: Explain compound interest, how much 1$ today will be worth in their retirement at a fixed rate. How does money devalue with inflation, and other basic personal finance aspects. But above all, give people the intuition rather than just say "you should invest your savings"
grondilu 9y ago
> I mean.. people can't do math in their head. Who cares? I kind of agree. I guess I can answer to the first question : "If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get?" but to be honest, it would take me an embarrassing long time to do it, and in the end I could very well have made a mistake. Don't get me wrong : mental calculus is an awesome skill and it so happens that I have lately been trying to improve in this regard. But the fact that not everybody masters this art should not be a surprise.
- gknoy 9y ago
  My reply would be "around five dollars, and if you want more let me whip out my phone's calculator". :D Now that I use a calculator, the tea adds up to just under $14, lower than my estimate of 15, but the taxes we non-Oregonians pay end up bringing it to a bit over $15. `sum(ceiling(price))` seems to be a useful way to estimate when the prices are small.
  - antisthenes 9y ago
    Hah, the tax calculation almost certainly would mean that I would get it wrong! I would have given the plain arithmetic answer.
mbesto 9y ago
> like monitoring your credit, your spending, creating a budget, pay off credit card in full, pay down high interest debt ASAP, avoid pay day loans, don't spend money on stupid things, invest in high quality index funds, etc. IMHO this all starts with the fact that many people I've encountered simply do not understand the difference between income and assets. In fact, I run into this all of the time on HN with people here who say "I can't believe that's a billion dollar business". I would love for them to do this experiment and ask the common person what the Time Value of Money is. I bet the results are way worse. I'm convinced that there are serious externalities to all of the financial innovation that has happened in the last 40 years that we simply choose to ignore and it hurts the common man.
- pge 9y ago
  I think the Time Value of Money is one of the most important concepts any lay person should understand but most don't. I came out of college (an Ivy league school) as a physics major with zero understanding of finance. At my first job, one of the first things my boss asked me was, "What would you pay me today in exchange for me paying you $100 in one year?" That, of course, led to a lesson on the time value of money. Not a difficult concept to grasp, but despite a great education, I had never had an occasion to think about it and understand it. Once you get that concept, everything else about finance and investing is pretty straightforward. I wish every high schooler had a basic finance course that started with that same question. Then moved on to personal finance basics like understanding interest (credit cards, car loans, mortgages, etc) and net worth (assets) v. income.
  - toomuchtodo 9y ago
    There is a great set of Khan Academy videos on the subject. https://www.khanacademy.org/economics-finance-domain/core-finance/interest-tutorial/present-value/v/time-value-of-money https://www.khanacademy.org/economics-finance-domain/core-fi...
- candu 9y ago
  In the US, at least, this is possibly because a not-insignificant number of people have zero or even negative net assets: https://en.wikipedia.org/wiki/Wealth_in_the_United_States https://en.wikipedia.org/wiki/Wealth_in_the_United_States It's hard to comprehend something you've never had (or, in some cases, even imagined you could have). I have friends who live paycheck to paycheck. For them, budgeting, saving, investing, long-term financial planning, etc. are completely foreign ideas. Part of this is an intergenerational legacy of poverty: their parents weren't in a position to think about these things either, so they were never raised to think about it - and so, like many North Americans, they spend money they don't have on things they don't need, work punishing hours at close to minimum wage to make up the difference, and are left with no time / energy afterwards to learn better. To compound the issue: even if they did have the time / energy to learn better, they can't secure the kind of credit that would enable them to quickly pay off their high-interest debts. It's deeply frustrating to watch, but this is what one step above abject poverty looks like. You have a lot of (well-meaning!) people telling you "just do X", without realizing that X often requires you have up-front capital, good credit, spare time, or any of the other things people in more stable financial situations take for granted. (I've been that person a few times, advising them to do things that to me are common sense - only to find out that, for them, those "common sense" steps are impossible.) In that sort of environment, it's meaningless to ask someone what the time value of money is; they have more serious structural problems with their finances that no amount of high-level philosophizing will solve.
noufalibrahim 9y ago
While your point is literally true, having basic arithmetic proficiency does go some way in making sense of the world. Quick mental calculations to see when you'll reach a certain place, ability to compare things when they're in different units etc. It's not only the skills but the overall mental model that they help create. The world starts to become a little more rational and sensible when you can do this.
- stagbeetle 9y ago
  Tell that to every maths teacher. "Show your work" was a nightmare.
  - noufalibrahim 9y ago
    As a kid, it was. As a secondary level student, I found it useful sometimes to write things out in detail when I was stuck and all the mental models I had didn't work. Good maths teachers can tell the difference and in my case, often did.
walshemj 9y ago
Id agree it would be more useful to understand your jurisdictions tax system and basic things about the stock market works ie what is a p/e ratio - how the bond yield curve works etc.
erikb 9y ago
Yes and no. Yes certainly the skills you describe are more in the financial category and help more, if you need to choose. But one really should be able to do both monitoring and simple calculations in one's head, at least getting into the range of the actual result. If you pay your single chicken leg with a $50 note and don't expect "more than $40 change" in return, then this can be bad for your finances as well.
tboyd47 9y ago
Anything involving the stock market is far from simple. And "don't spend money on stupid things" is more class signaling than financial advice. Who decides what is "stupid?" If it's important to you, why not estimate how much of an impact the purchase will have on your budget, and decide based on that? That requires math. I dunno, I do arithmetic in my head just about every day. I can't imagine engaging in any sort of business transaction without that skill. Even just going to the grocery store, not being able to round, add, and multiply, means you're always going to be surprised at the cash register. I'd much rather know how much I'm going to spend before I get to the cash register so I don't look silly asking them to put things back for me.
- hitekker 9y ago
  > "don't spend money on stupid things" is more class signaling than financial advance. If it weren’t for the sneering tone of the GP, the advice could have been meant as “don’t buy transient things that are beyond your means”
  - tboyd47 9y ago
    That proves my point even further. The "beyond your means" part is where math starts being needed again.
- skybrian 9y ago
  I think what we're seeing here is a class difference? For some people, if the grocery bill is higher than expected, you just shrug and try to do better next time.
  - sangnoir 9y ago
    > For some people, if the grocery bill is higher than expected, you just shrug and try to do better next time. I knew I had crossed some class boundary when I found myself not paying close attention to the running total at checkout. There is a difference in mindset for people whose budgets are rounded to the nearest $1, $10 or $100 respectively.
MR4D 9y ago
I’m not sure whether your comment was serious or not. If you can’t figure out change in your head, nothing will help you be able to budget. After all, budgeting can be looked at as a more complicated version of calculating change (albeit from a paycheck). And of course, without a good budget, your credit won’t be good, etc.

jandrewrogers 9y ago

These aren't even "financial" skills but a lack of basic arithmetic ability. It is a failure of the education system. I expect if we tested for actual financial skills the results would be even worse, as that requires some domain knowledge beyond basic arithmetic. I'm not sure this is easily fixable; most people I know have a very limited interest in understanding financial maths.

AnIdiotOnTheNet 9y ago
I don't think the education system is at fault. Mental arithmetic is a skill you need to practice, and since a lot of us either spend a lot of time at a computer or always have one in our pocket, why would we?
- hackerman12345 9y ago
  Here are the questions, if you can't get them correct without a computer handy, than your education is suspect. I would expect them to appear in a 3rd grade math book. 1. If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get? 2. If a litre of cola costs $3.15, how much will you pay for a third of a litre? 3. If a football club offers the same discount for all season tickets - Main Stand - $50 for single entry, $300 for a season; Stand 2 - $35 for single entry, $210 for a season; Stand 3 - $25 for single entry, $150 for a season - what would the price be for a Stand 4 season ticket, where a single entry costs $21? The answers are $6.10, $1.05 and $126 respectively.

kartan 9y ago

If you want capitalism to work, you need some kind of "homo economicus" that is able to look for their own selfinterest. If what you have is companies powered by complex financial systems and artificial intelligence help while consumers are not able to get a discount right, you are going to end with all money in one side of the table with the other empty handed. This is another reason to improve our education systems. We need to function in an increasing complex society and that requires an incresing education quality with more resources, better methologies and more time dedicated to build knowledge and less to build national identity. (To memorize the list of presidents is not as an useful skill as it used to be, I guess).

tysonzni 9y ago
what you have is companies powered by complex financial systems and artificial intelligence help while consumers are not able to get a discount right Yeah agreed. Perhaps products (chatbots, voice?) that simply tell people what to do can partially solve for this. In many cases however, people have self-interests based on vastly different values (think relationship or hobby), and their instincts are good enough at approximating what they want. And while personal finance is tricky for many folks, not every decision is like personal finance which has a easily defined value function like calculating compound interest or choosing discounts. So my view is people are usually right!
- pjc50 9y ago
  "Alexa thinks you should apply for a personal loan through Amazon Finance" Yeah, no conflict of interest there
  - undreren 9y ago
    Capitalism is great for the many when most business are small and there's plenty of competition. Capitalism is great for the few in more or less all other scenarios. We live in one of the others, I'm afraid.
shaki-dora 9y ago

simula67 9y ago

This study does not mention whether the participants where asked to do the arithmetic in their head : https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx https://johnjerrim.files.wordpress.com/2018/03/piaac_working...

John_KZ 9y ago

They don't control for age, so their study is worthless. Many of the countries mentioned as "the worst" have ageing populations and lots of emigrants.

erikb 9y ago
I hope you really mean "emigrants", so smart people leaving their home countries, leaving the aging population that was not capable of going abroad. And I think people downvote because they assume you mean "immigrants" being stupid and thereby decreasing the average IQ in countries with lots of immigrants. The second statement I would also downvote, but until I'm convinced of the opposite I assume you mean the first.
- John_KZ 9y ago
  Ah, that makes sense. I did mean emigrants. Emmigration and immigration have no correlation with IQ regardless. The lever of education sometimes does dictate who migrates (due to legal requirements or financial motivation for example), but the paper requires only basic arithmetic so it wouldn't have much of an effect anyway. At this point I'm used to getting downvoted for no obvious reason so I don't even bother to ask why.
  - erikb 9y ago
    My experience is also that the randomness increased over the recent years. That also means sometimes I get 40+ points for something that wasn't even worth one upvote in my opinion.

juskrey 9y ago

Results show clearly that those skills are not necessary for prosperity

alimw 9y ago
But for those already poor, their lack will matter more.
erikb 9y ago
Which results? Some rich people stay rich by getting gifts from their daddies, by being mean and by having other people do the calculations for them. Doing it this way one might even become president. But I think you won't find anybody that got to prosperity without it. Even the meanest of exploiters need to calculate their money and check their balances.

waldfee 9y ago

It bugs me that the list of countries isn't sorted. Who does that?

sleet 9y ago
See page 26 of the report: https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx https://johnjerrim.files.wordpress.com/2018/03/piaac_working...

bramjans 9y ago

Having lived for a while in Chile (where according to the article financial literacy is below average), my experience very much agrees with this. I noticed many people struggling with basic arithmetic resulting in me having to check the change at small shops since it would often be wrong. It also leads to people making crazy decisions with respect to choosing to buy in cash or on credit (in quota). I'm not talking about household appliances that people need, but I've seen things like a person buying a 50$ blanket in 12 installments over a year. Many people would just fill up they're salary with monthly credit payments. I've heard some people say this shouldn't be an issue with most supermarket labels including the "price per unit weight/volume". I agree this should be an obligation by law, but I feel like many people are unaware of these labels. I know it sounds crazy to a tech crowd but I'm sure many people don't compare the weight/volume with the price but instead go for the cheaper product price.

Double_a_92 9y ago
> labels including the "price per unit weight/volume" We overestimate the average person. Not everybody knows what that even means. They just don't have a concept of ratios that can be compared. > go for the cheaper product price. That might still be a valid option if the packaged quantities differ my a lot. E.g. if I only need 100g of ham for a sandwich, it's not better to buy a whole 1kg piece if that's just going to rot in my fridge.
- AnIdiotOnTheNet 9y ago
  I don't think we overestimate people necessarily, I think we overestimate how much they desire to spend their time thinking about the same things we do.

baybal2 9y ago

Basic arithmetics is not the only deficient field in UK secondary school math curriculum. Higher tier domains like statistics, calculus, trigonometry, geometry, vectors, math analysis are deficient too.

walshemj 9y ago
STEM qualifications aren't considered very highly in the UK
- throwawayts 9y ago
  The Times Higher Education rankings puts 3 UK universities in the top 10 worldwide for physical sciences and for engineering. Or do you just mean they aren't considered attractive careers to students and children?
  - walshemj 9y ago
    I meant socially those in the stem professions are looked down on.
    - smcl 9y ago
      By whom? I have not experienced this at all. STEM jobs are by UK standards well paid and would be considered solid respectable to enter by everyone I can think of. Unless you're comparing the salaries in these to those of Bankers ... but that's a whole different kettle of fish, and there's the added complication that Bankers are actually actively disliked by an overwhelming majority of the population.
      - walshemj 9y ago
        No actually real science jobs are paid appallingly I know what say the STEM grades in the civil service are paid. And even developers are paid badly when compared to our peers in the states and with other professions in the UK. Compare what google pays in London to what it pays in say Kansas I could buy a house there (Kansas) out if my cash savings You do know that the train driver on my commute to London is paid £60k for a 4 day week and most of them after overtime are on >£75k with a DB pension! The UK has been known for decades as a place to get good engineers cheap.

crdoconnor 9y ago

>Examples of the sorts of questions asked > >1. If you bought four packs of tea: chamomile ($4.60), green ($4.15), black ($3.35) and lemon ($1.80) with a $20 note, how much change would you get? Put yourself in the mind of somebody taking this questionnaire. Do you actually care if the answer is correct? Will you lose money if you get the answer wrong? Are you in a hurry to finish the questionnaire and go and do something else? Now put yourself in the mind of a lobbyist who represents utilities companies, financial services companies and HMOs. Your customers have all come under fire because they have needlessly complicated pricing structures designed to confuse people. This is a very profitable practice so they want to continue doing it, but they'd like to draw attention away from it. Regulators sometimes come under political pressure to do something about it (among others, Elizabeth Warren has put this kind of pressure on, and they hate her for it). If, as a lobbyist, if you get others to reframe the issue as one of "lack of financial literacy" it helps take the heat off your customers. However, It's all very well saying "people just need to become more financially literate!" but that wouldn't sound very convincing coming from a lobbyist representing a company that has a financial stake in everybody believing it. Therefore, it's better to be able to get your media contacts and politician friends say "studies say people need to become more financially literate". There is, as such, a demand for studies like this. And, Aditi Bhutoria, John Jerrim and Anna Vignoles happily (although possibly unknowingly) filled this demand by giving a bunch of random, disinterested people a math quiz where it didn't matter if they got the answers wrong and calling it "science".

NiklasMort 9y ago

That's hardly news, nor surprising given its done systematically on purpose. Imagine people would be aware of how they are being ripped off by the financial systems...that'd be bad. There is a reason why finance basics or general life skills are not taught in schools (no matter if US or EU). Sure you maybe learn how to calculate interest but that's probably about it.

RickJWagner 9y ago

I absolutely believe it. Warren Buffet is working to fight this, he's made a series of "Secret Millionaire's Club" videos designed to educate kids about money. I think it's a great program.

amichal 9y ago

At a local Starbucks the other day the person working the register insisted the quarter(25c) I gave him was nickle(5c). Later when giving me 16c in change he gave me a quarter and a penny. At McDonalds the next day I was refunded for a 4.67 order that took too long with 5.50 cents. My experience matches the article. On a more serious note: We design software for use by finance experts. After user testing we’ve had to: - remove error bars from charts because folks didn’t know what they were and found the concept confusing - remove histograms (users didn’t know what they represented). - remove “percentile” after no one could agree if 99th perctile was higher or lower then 1st - eventually change rankings from “3rd” to “3rd highest score out of NN respondents”

giardini 9y ago
amichal says>After user testing we’ve had to:... - remove “percentile” after no one could agree if 99th percentile was higher or lower then 1st..." IIRC studies show that people comprehend natural frequencies (e.g., "10 of every 1000 women have cancer") more easily than they do percentages ("1% women have cancer").
ApolloFortyNine 9y ago
I actually have had the same thing happen at McDonalds, sometimes they seem to just not have a receipt for you so they give you whatever they feel like. It's always been more than I paid, but it is kinda like "you had one job." Supposedly if you pay with cash some cashiers pocket the cash and give you change from their own pocket, so maybe that's what happened here.
pc86 9y ago
I have a hard time seeing how you can be a "finance expert" and not know what an error bar or histogram is.

TorKlingberg 9y ago

I appreciate that the BBC links to the original study. The tables and figures are all at the end: https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx https://johnjerrim.files.wordpress.com/2018/03/piaac_working...

poster123 9y ago

One argument against redistribution is that one is taking money from high-IQ, more responsible people who know how to manage money on average and giving it to low-IQ, less responsible people who don't know how to manage money. This needs to be balanced against the primary argument for redistribution, that someone earning $30K/year can use an extra $1K more than someone earning $300K/year wil l miss it.

folli 9y ago
To follow this line of thought, you're then advocating for heavy inheritance taxation? A heir of a multi-billion dollar fortune is not more likely to have an above average IQ or be more responsible, so he should start from scratch as does the average Joe?
- poster123 9y ago
  Billionaires are smarter, more hardworking, and ambitious on average, and there is likely some genetic competent to each of these qualities. Certainly there is for IQ. Is your guess for the average IQ of Bill Gates' children 100? I'd guess say 130.
  - AnIdiotOnTheNet 9y ago
    Exactly the same reasoning can be used to justify monarchy.
    - pc86 9y ago
      Monarchy is fine as long as you elect the monarch every few years.

apo 9y ago

Some will look and this and say, "big deal, people can't do math in their heads." There may be more to it. Consider the recent "riddle" in which a man buys a horse, sells it, and buys it back again, then sells it. The question is, how much money did the man make or lose: http://www.independent.co.uk/news/science/math-riddle-quiz-question-man-buys-a-horse-viral-a8221136.html http://www.independent.co.uk/news/science/math-riddle-quiz-q... It was so simple to me that it seemed like it must be a trick question. It's not. I asked this question to people I was certain would get the right answer - and they didn't. This is a deep topic that needs to be explored much more thoroughly than it might appear on the surface. I suspect that many of the people who can't do this kind of reasoning are running companies and countries.

arkryne 9y ago
I had a really funny experience trying that problem. As I began reading it, I developed a strong desire to glean over it and 'just get done with it' and felt a distracting buzz in my mind. I enjoy studying maths and doing proofs myself but I got this basic questions wrong. I just went'ugh, started with 60 spent, ended up selling for 90' and I went wrong with it. The point is, I felt a strong aversion to word problems and such, which I think remind me of riddles which always trump me. Therein lies the desire to 'just be done with it' and the underlying aversion to maths I think other people also have.
- AnIdiotOnTheNet 9y ago
  It's because word problems are nothing but obfuscation. Here's the same problem written out in conventional mathematical notation: (-60 + 70) + (-80 + 90) Boy, that's pretty straightforward isn't it?
digi_owl 9y ago
I wonder how many would struggle if it was presented simply a 0-60+70-80+90=? rather than the block of text in the article. At least for me the problem is that when i get a block of text like that i get distracted from the math by scrutinizing how everything is worded, in case there is a trick question.
9y ago

9889095r3jh 9y ago

After reading 'Thinking Fast and Slow" by Daniel Kahneman, I'm not surprised people can't calculate their bill and determine change in line at the super market. Solving math problems like that requires deliberate focus and effort. Nobody has the time or energy to do that on line at the supermarket. Most probably estimate.