
'Striking weaknesses' in adult financial skills - onuralp
http://www.bbc.com/news/education-43384434
======
volgo
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.

~~~
Kuiper
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
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
Just multiply or divide by 10s or 100s or whatever. It's not hard.

Oh.. oh yeah. ;)

~~~
walshemj
That's not going to work with imperial units :-)

~~~
cafard
And heaven knows programmers can't multiply by 16.

~~~
koolba
Only bad programmers multiply by 16.

The good ones use a bit shift.

~~~
dzdt
For about the last 15 years the compiler will generated the same code in
either case. Thats really old advice!

------
kartan
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
_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
"Alexa thinks you should apply for a personal loan through Amazon Finance"

Yeah, no conflict of interest there

~~~
undreren
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.

------
bramjans
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
> 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
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.

------
crdoconnor
>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".

------
apo
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-q...](http://www.independent.co.uk/news/science/math-riddle-quiz-
question-man-buys-a-horse-viral-a8221136.html)

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
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
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?

------
jandrewrogers
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
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
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.

------
simula67
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...](https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx)

------
amichal
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”

~~~
ApolloFortyNine
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.

------
poster123
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
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
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
Exactly the same reasoning can be used to justify monarchy.

~~~
pc86
Monarchy is fine as long as you elect the monarch every few years.

------
dmoy
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.

------
NiklasMort
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.

------
9889095r3jh
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.

------
TorKlingberg
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...](https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx)

------
baybal2
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.

~~~
smcl
Is this from experience or general "I read that exams got easier" hearsay? I
got good coverage of all the topics you discussed (however I'm not sure what
"math analysis" refers to). I went through the Scottish system (ending around
2003) but I cannot imagine it was much different/worse in England, NI and
Wales and I've no reason to believe they made things easier.

~~~
baybal2
I wanted to say that it is not only arithmetics that is bad, but the whole
math field in general. Unlike in cases where a general knowledge of the field
is there, but the person can't calculate 2+2 without a calculator.

~~~
smcl
Right and I was asking if this is from experience (i.e. you went through the
system or worked in the UK or with UK-educated people).

------
RickJWagner
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.

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

~~~
sleet
See page 26 of the report:

[https://johnjerrim.files.wordpress.com/2018/03/piaac_working...](https://johnjerrim.files.wordpress.com/2018/03/piaac_working_report_march_2018.docx)

------
juskrey
Results show clearly that those skills are not necessary for prosperity

~~~
alimw
But for those already poor, their lack will matter more.

------
John_KZ
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
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
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
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.

