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Two in Three Adults Worldwide Are Financially Illiterate

cpwill said:
That's why we need forced savings. I'd add in that we also need this kind of material in high schools.
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It's rare that we agree. Hell might have just froze over.
 
Dittohead not! said:
Option 1 sounds like a good idea, but I think most high schools teach such things as interest and percentages already. It doesn't always take, however.
Option 2 sounds pretty authoritarian, but no more so than SS. It would no doubt work.
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Increasing SS (the tax rate and the benefits) would be a lot more logical.
 
Why bother teaching financial literacy when our financial savings will just be taken away from us anyway?
 
imagep said:
I think that income tax is more or less indexed to inflation. The cutoff for each tax bracket tends to increase by two or three percent each years.

But something else that wasn't mentioned is the fact that debt may make a difference. My mortgage debt is locked in for another 15 years, so if we had 100% inflation and my income doubles, I will have more after debt available income.
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That's a great argument for home ownership, isn't it?
 
doubt this is a recent illiteracy
almost 40 years ago my friend was a superior car salesman
he used two techniques effectively
tried to always avoid discussing price of the car
instead focusing only on the monthly payment the buyer would incur
and for those more financially astute, who insisted on bargaining on price, but who balked at his best offer, he would aloofly comment that they could not afford it anyway
i was stunned to hear that many of the persons opted to buy the car to prove him wrong rather than driving to another car lot in search of a better offer


and yes, these basic financial realities should be taught in school, together with other fundamental life skills
 
justabubba said:
doubt this is a recent illiteracy
almost 40 years ago my friend was a superior car salesman
he used two techniques effectively
tried to always avoid discussing price of the car
instead focusing only on the monthly payment the buyer would incur
and for those more financially astute, who insisted on bargaining on price, but who balked at his best offer, he would aloofly comment that they could not afford it anyway
i was stunned to hear that many of the persons opted to buy the car to prove him wrong rather than driving to another car lot in search of a better offer


and yes, these basic financial realities should be taught in school, together with other fundamental life skills
Click to expand...

That tactic worked 40 years ago, and it works today. Ever watch the car ads? When do they ever mention the price of the car?

You can lease the brand new Zoom Mo Bil with backup cameras, robotic everything and a guaranteed chick magnet! It's only $250 per month on a two year lease

with $3,500 down, based on 5,000 miles per year, with excellent credit. Other charges may apply. Strip down model only. Only one in the entire world at that price.
 
Pretty shocking. And one could hardly come up with a better argument for retaining major social insurance programs, like old age pensions, in the hands of government.
 
imagep said:
Increasing SS (the tax rate and the benefits) would be a lot more logical.
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Actually, it would be illogical. A large reason why nobody saves for retirement and are illiterate when it comes to the matter is because they think SS is their retirement. Best thing to do allow up to each year 10% of income to be saved and non-taxed if it stays in savings account for a year. Then each person can be allowed up to 5 times to dip into that account for certain purchases (college for children, home buying, or medical).
 
2/3 financially illiterate? That number seems low.

I would have guessed somewhere between 80-90%.
 
Kushinator said:
Standard and Poor's rating services did a financial literacy survey that spanned 148 countries and 150k people worldwide. The global results were not boast-worthy , with 2/3 of respondents scoring as financially illiterate. In the U.S., only 57% were deemed financially literate. Rounding out the top ten are:

ufwyn5n3uu6eoo_ofq2u6w.png


The questions weren't difficult, nor did they require exact calculations. How can we expect people to make good financial choices if they are not properly taught basic financial concepts to begin with?

The Gallup article can be found here, and the S&P report can be found here.
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Only five questions were used to gauge financial literacy. That seems odd.

Yet through this they tested for: risk diversification, inflation, numeracy and compound interest.

Risk Diversification

Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?

- The average person does NOT invest. It's an assumption that investments are only for wealthy people and if you're average joe then that's just not you. Thus, the average person in the US doesn't have money and/or the desire to invest in a business or other means of making money grow over time. Ergo: many people couldn't care less to learn more.

Inflation

Suppose over the next 10 years the prices of the things you buy double. If your income ALSO doubles, will you be able to buy less than you can buy today, the same as you can buy today OR more than you can buy today?

- I hope a lot of people didn't miss this because it's something we are struggling with in our economy: inflation continues . . . but income does NOT.

Numeracy

Suppose you need to borrow 100 (country currency). Which is the lower amount to pay back: 105 (country currency) or 100 (country currency) plus 3%?

- Greater than, Less than . . . but I imagine what would throw people off is the fact that it's percentages, something that a lot of people don't understand.

Compound Interest

Suppose you put money in the bank for two years and the bank agrees to add 15% per year to your account. Will the bank add MORE money to your account the second year than it did the first year, or will it add the SAME amount of money both years?
Suppose you had 100 (country currency) in a savings account and the bank adds 10% per year to the account. How much money would you have in the account after five years if you did not remove any money from the account: more than 150 (country currency), exactly 150 (country currency) or less than 150 (country currency)?

- Again with percentages, something that many students struggle with from the day it's introduced.
 
Kushinator said:
Standard and Poor's rating services did a financial literacy survey that spanned 148 countries and 150k people worldwide. The global results were not boast-worthy , with 2/3 of respondents scoring as financially illiterate. In the U.S., only 57% were deemed financially literate. Rounding out the top ten are:

ufwyn5n3uu6eoo_ofq2u6w.png


The questions weren't difficult, nor did they require exact calculations. How can we expect people to make good financial choices if they are not properly taught basic financial concepts to begin with?

The Gallup article can be found here, and the S&P report can be found here.
Click to expand...

Actually, I'd have guessed that two out of three adults worldwide were literally illiterate.
 
Dittohead not! said:
Option 1 sounds like a good idea, but I think most high schools teach such things as interest and percentages already. It doesn't always take, however.
Option 2 sounds pretty authoritarian, but no more so than SS. It would no doubt work.
Click to expand...
Best I heard of was a school assigning roles to the students, simply role playing....
OK, Stacy/Stacie, you are a (name profession) earning (average amount for that profession) and you have a stay at home spouse and 2 kids. Choose a life style you think you can afford (from supplies data sheets) and see if you are earning enough....
or something like that...done for an entire semester.
 
UtahBill said:
Best I heard of was a school assigning roles to the students, simply role playing....
OK, Stacy/Stacie, you are a (name profession) earning (average amount for that profession) and you have a stay at home spouse and 2 kids. Choose a life style you think you can afford (from supplies data sheets) and see if you are earning enough....
or something like that...done for an entire semester.
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Role playing is a good idea. I think there are computer simulations as well that make a game out of managing money. One problem: A lot of the teens think they're going to make big bucks in professional sports.
 
Ganesh said:
Pretty shocking. And one could hardly come up with a better argument for retaining major social insurance programs, like old age pensions, in the hands of government.
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So the problem with being stupid and helpless is that people are expected not to be? And so we should absolve them of the expectation permanently?
 
I'm surprised it's not higher when you consider that studies show that about 20% of Americans are basically illiterate...in general.
https://en.wikipedia.org/wiki/Literacy_in_the_United_States
This government study showed that 21% to 23% of adult Americans were not "able to locate information in text", could not "make low-level inferences using printed materials", and were unable to "integrate easily identifiable pieces of information."
Click to expand...
 
We blame the people, or their schooling or both ... ?
 
P I S A

Neomalthusian said:
So the problem with being stupid and helpless is that people are expected not to be? And so we should absolve them of the expectation permanently?
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Rather, I suggest, is that they should not be. And that is a matter of primary/secondary schooling for the ability to make basic calculations and logical assumptions.

But if you are not, who's fault is it - the schooling or yourself? I say its preponderantly the former. In general, humans are not born dumb. But they certainly can be made dumb. Howzat?

It depends upon external influences in the Learning Process. (And here the BoobTube clearly is a factor.) Meaning, in the formation of the individual, little is more important than Education.

And in that matter, the US is fairly mediocre as regard primary/secondary schooling. Whyzat?

Consider the results of the OECD's PISA program. (No, it has nothing whatsoever to do with that delightful town in Italy.) PISA = Program for International Student Assessemt - which tests secondary school levels in the OECD countries on a systematic basis. Students across the 64 countries are tested upon Reading, Writing and Science.

Here are the Key PISA 2012 Findings for the US (sourced from here):
"Key findings
• Among the 34 OECD countries, the United States performed below average in mathematics in
2012 and is ranked 27th (this is the best estimate, although the rank could be between 23 and
29 due to sampling and measurement error). Performance in reading and science are both
close to the OECD average. The United States ranks 17 in reading, (range of ranks: 14 to 20)
and 20 in science (range of ranks: 17 to 25). There has been no significant change in these
performances over time.
• Mathematics scores for the top-performer, Shanghai-China, indicate a performance that is the
equivalent of over two years of formal schooling ahead of those observed in Massachusetts,
itself a strong-performing U.S. state.
• While the U.S. spends more per student than most countries, this does not translate into
better performance. For example, the Slovak Republic, which spends around USD 53 000 per
student, performs at the same level as the United States, which spends over USD 115 000 per
student.
• Just over one in four U.S. students do not reach the PISA baseline Level 2 of mathematics
proficiency – a higher-than-OECD average proportion and one that hasn’t changed since 2003. At
the opposite end of the proficiency scale, the U.S. has a below-average share of top performers.
• Students in the United States have particular weaknesses in performing mathematics tasks with
higher cognitive demands, such as taking real-world situations, translating them into mathematical
terms, and interpreting mathematical aspects in real-world probleMS. An alignment study between
the Common Core State Standards for Mathematics and PISA suggests that a successful
implementation of the Common Core Standards would yield significant performance gains also in
PISA.
• Socio-economic background has a significant impact on student performance in the United
States, with some 15% of the variation in student performance explained by this, similar to
the OECD average. Although this impact has weakened over time, disadvantaged students
show less engagement, drive, motivation and self-beliefs.
• Students in the U.S. are largely satisfied with their school and view teacher-student relations
positively. But they do not report strong motivation towards learning mathematics: only 50%
of students agreed that they are interested in learning mathematics, slightly below the OECD
average of 53%."

Next, consider the ranking of the US amongst the OECD country members here. (Scroll down to page 5.)

I'll save you the counting: The US is in 36th position of all 64 countries.

We can do one helluva lot better. The only question is, How?
 
Last edited:
Lafayette said:
P I S A



Rather, I suggest, is that they should not be. And that is a matter of primary/secondary schooling for the ability to make basic calculations and logical assumptions.

But if you are not, who's fault is it - the schooling or yourself? I say its preponderantly the former. In general, humans are not born dumb. But they certainly can be made dumb. Howzat?

It depends upon external influences in the Learning Process. (And here the BoobTube clearly is a factor.) Meaning, in the formation of the individual, little is more important than Education.

And in that matter, the US is fairly mediocre as regard primary/secondary schooling. Whyzat?

Consider the results of the OECD's PISA program. (No, it has nothing whatsoever to do with that delightful town in Italy.) PISA = Program for International Student Assessemt - which tests secondary school levels in the OECD countries on a systematic basis. Students across the 64 countries are tested upon Reading, Writing and Science.

Here are the Key PISA 2012 Findings for the US (sourced from here):
"Key findings
• Among the 34 OECD countries, the United States performed below average in mathematics in
2012 and is ranked 27th (this is the best estimate, although the rank could be between 23 and
29 due to sampling and measurement error). Performance in reading and science are both
close to the OECD average. The United States ranks 17 in reading, (range of ranks: 14 to 20)
and 20 in science (range of ranks: 17 to 25). There has been no significant change in these
performances over time.
• Mathematics scores for the top-performer, Shanghai-China, indicate a performance that is the
equivalent of over two years of formal schooling ahead of those observed in Massachusetts,
itself a strong-performing U.S. state.
• While the U.S. spends more per student than most countries, this does not translate into
better performance. For example, the Slovak Republic, which spends around USD 53 000 per
student, performs at the same level as the United States, which spends over USD 115 000 per
student.
• Just over one in four U.S. students do not reach the PISA baseline Level 2 of mathematics
proficiency – a higher-than-OECD average proportion and one that hasn’t changed since 2003. At
the opposite end of the proficiency scale, the U.S. has a below-average share of top performers.
• Students in the United States have particular weaknesses in performing mathematics tasks with
higher cognitive demands, such as taking real-world situations, translating them into mathematical
terms, and interpreting mathematical aspects in real-world probleMS. An alignment study between
the Common Core State Standards for Mathematics and PISA suggests that a successful
implementation of the Common Core Standards would yield significant performance gains also in
PISA.
• Socio-economic background has a significant impact on student performance in the United
States, with some 15% of the variation in student performance explained by this, similar to
the OECD average. Although this impact has weakened over time, disadvantaged students
show less engagement, drive, motivation and self-beliefs.
• Students in the U.S. are largely satisfied with their school and view teacher-student relations
positively. But they do not report strong motivation towards learning mathematics: only 50%
of students agreed that they are interested in learning mathematics, slightly below the OECD
average of 53%."

Next, consider the ranking of the US amongst the OECD country members here. (Scroll down to page 5.)

I'll save you the counting: The US is in 36th position of all 64 countries.

We can do one helluva lot better. The only question is, How?
Click to expand...

Perhaps by selecting the most academically able students to get to the point where they take a test like PISA? You know, like they do in other countries.

Somehow, we've come to the conclusion that we need to prepare every student for university work, and that our educational system is failing when they don't all make it.
 
Dittohead not! said:
That tactic worked 40 years ago, and it works today. Ever watch the car ads? When do they ever mention the price of the car?

You can lease the brand new Zoom Mo Bil with backup cameras, robotic everything and a guaranteed chick magnet! It's only $250 per month on a two year lease

with $3,500 down, based on 5,000 miles per year, with excellent credit. Other charges may apply. Strip down model only. Only one in the entire world at that price.
Click to expand...

because people think in terms of their monthly budgets

most cant process 40k for an SUV

but they can understand 450 a month

the problem is as the prices continue to go up, so have the term of the loans

i have banks now trying to get us to give our customers 84 month loans as a normal loan

7 years! when 5 year loans hit, i thought that was the worst it could get....but oh no

it is nuts....but people dont want to buy the cars they can truly afford.....

the ones @ 48 months with 25% down....those customers are the rare bird now
 
Lafayette said:
We blame the people, or their schooling or both ... ?
Click to expand...

it always starts with the parents. bad finance isn't a given it is a learned behavior.
next is education which goes on both at home and at school.

I think all high school students should be required to take a course in personal finance.

I went through dave ramnsey's debt freedom class and I between me and my wife we have paid off 3 credit cards
2 car loans and are almost debt free. I just have my SL and my mortgage left.

it really was a great course.
 
gdgyva said:
because people think in terms of their monthly budgets

most cant process 40k for an SUV

but they can understand 450 a month

the problem is as the prices continue to go up, so have the term of the loans

i have banks now trying to get us to give our customers 84 month loans as a normal loan

7 years! when 5 year loans hit, i thought that was the worst it could get....but oh no

it is nuts....but people dont want to buy the cars they can truly afford.....

the ones @ 48 months with 25% down....those customers are the rare bird now
Click to expand...

yeah because people can't afford cars anymore.
I am going to have to unfortuantly buy another car next year.

the car I need if I buy it new is going to be 50-60k.

if I buy it used I am hoping to get it for 30k. with a 10k+ down payment.

I am going to be only to afford about 400 a month payment if some other things go correctly.
 
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