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People who are bad with numbers often find it harder to make ends meet – even if they are not poor

<div class="theconversation-article-body"><em><a href="https://theconversation.com/profiles/wandi-bruine-de-bruin-275600">Wändi Bruine de Bruin</a>, <a href="https://theconversation.com/institutions/usc-dornsife-college-of-letters-arts-and-sciences-2669">USC Dornsife College of Letters, Arts and Sciences</a> and <a href="https://theconversation.com/profiles/paul-slovic-359838">Paul Slovic</a>, <a href="https://theconversation.com/institutions/university-of-oregon-811">University of Oregon</a></em></p> <h2>The big idea</h2> <p>People who are bad with numbers are more likely to experience financial difficulties than people who are good with numbers. That’s according to <a href="https://doi.org/10.1371/journal.pone.0260378">our analyses</a> of the <a href="https://wrp.lrfoundation.org.uk/explore-the-poll">Lloyd’s Register Foundation World Risk Poll</a>.</p> <p>In this World Risk Poll, people from 141 countries were asked if 10% was bigger than, smaller than or the same as 1 out of 10. Participants were said to be bad with numbers if they did not provide the correct answer – which is that 10% is the same as 1 out of 10. <a href="https://doi.org/10.1371/journal.pone.0260378">Our analyses</a> found that people who answered incorrectly are often among the poorest in their country. Prior studies in the <a href="https://doi.org/10.1111/j.1468-0297.2010.02394.x">United States</a>, <a href="https://doi.org/10.1111/j.1475-5890.2007.00052.x">United Kingdom</a>, <a href="https://doi.org/10.1016/j.joep.2016.02.011">the Netherlands</a> and <a href="https://doi.org/10.1111/joca.12294">Peru</a> had also found that people who are bad with numbers are financially worse off. But <a href="https://doi.org/10.1371/journal.pone.0260378">our analyses of the World Risk Poll</a> further showed that people who are bad with numbers find it harder to make ends meet, even if they are not poor.</p> <p>When we say that they found it harder to make ends meet, we mean that they reported on the poll that they found it difficult or very difficult to live on their current income, as opposed to living comfortably or getting by on their current income.</p> <p><a href="https://doi.org/10.1371/journal.pone.0260378">Our analyses</a> also indicate that staying in school longer is related to better number ability. People with a high school degree tend to be better with numbers than people without a high school degree. And college graduates do even better. But even among college graduates there are people who are bad with numbers – and they struggle more financially.</p> <p><iframe id="yOIiX" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/yOIiX/3/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <p>Of course, being good with numbers is not going to help you stretch your budget if you are very poor. <a href="https://doi.org/10.1371/journal.pone.0260378">We found</a> that the relationship between number ability and struggling to make ends meet holds across the world, except in low-income countries like Ethiopia, Somalia and Rwanda.</p> <p><iframe id="RejA1" class="tc-infographic-datawrapper" style="border: 0;" src="https://datawrapper.dwcdn.net/RejA1/8/" width="100%" height="400px" frameborder="0" scrolling="no"></iframe></p> <h2>Why it matters</h2> <p>The ability to understand and use numbers is also called <a href="http://doi.org/10.1093/oso/9780190861094.001.0001">numeracy</a>. Numeracy is <a href="https://doi.org/10.1787/1f029d8f-en">central to modern adult life</a> because numbers are everywhere.</p> <p>A lot of well-paying jobs involve working with numbers. People who are bad with numbers often perform worse in these jobs, including <a href="https://doi.org/10.1111/ecin.12873">banking</a>. It can therefore be hard for people who are bad with numbers to <a href="http://www.doi.org/10.1108/00400919710164125">find employment and progress in their jobs</a>.</p> <p>People who are bad with numbers are less likely <a href="https://www.pnas.org/content/116/39/19386.short">to make good financial decisions</a>. Individuals who can’t compute how interest compounds over time <a href="https://doi.org/10.1111/j.1540-6261.2009.01518.x">save the least and borrow the most</a>. People with poor numerical skills are also more likely <a href="https://doi.org/10.1037/0022-3514.41.3.586">to take on high-cost debt</a>. If you’re bad with numbers, it is hard to <a href="https://doi.org/10.1017/S1474747215000232">recognize</a> that paying the US$30 minimum payment on a credit card with a $3,000 balance and an annual percentage rate of 12% means it will never be paid off.</p> <h2>What still isn’t known</h2> <p>It is clear that people who are bad with numbers also tend to struggle financially. But we still need to explore whether teaching people math will help them to avoid financial problems.</p> <h2>What’s next</h2> <p>In her book “<a href="http://doi.org/10.1093/oso/9780190861094.001.0001">Innumeracy in the Wild</a>,” Ellen Peters, director of the Center for Science Communication Research at the University of Oregon, suggests that it is important for students to take math classes. American high school students who had to <a href="https://doi.org/10.3368/jhr.51.3.0113-5410R1">take more math courses</a> than were previously required had better financial outcomes later in life, such as avoiding bankruptcy and foreclosures.</p> <p>Successfully teaching numeracy also means helping students gain confidence in using numbers. People with <a href="https://doi.org/10.1073/pnas.1903126116">low numerical confidence</a> experience bad financial outcomes, such as a foreclosure notice, independent of their numeric ability. This is because they may not even try to take on complex financial decisions.</p> <p>Numerical confidence can be boosted in different ways. Among American <a href="https://doi.org/10.1037/0022-3514.41.3.586">elementary school children</a> who were bad with numbers, setting achievable goals led to better numerical confidence and performance. Among American <a href="https://doi.org/10.1371/journal.pone.0180674">undergraduate students</a>, a writing exercise that affirmed their positive values improved their numerical confidence and performance.</p> <p>Other important next steps are to find out whether training in numeracy can also be provided to adults, and whether training in numeracy improves the financial outcomes of people who do not live in high-income countries.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important;" src="https://counter.theconversation.com/content/172272/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" /><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https://theconversation.com/republishing-guidelines --></p> <p><a href="https://theconversation.com/profiles/wandi-bruine-de-bruin-275600"><em>Wändi Bruine de Bruin</em></a><em>, Professor of Public Policy, Psychology and Behavioral Science, USC Sol Price School of Public Policy, <a href="https://theconversation.com/institutions/usc-dornsife-college-of-letters-arts-and-sciences-2669">USC Dornsife College of Letters, Arts and Sciences</a> and <a href="https://theconversation.com/profiles/paul-slovic-359838">Paul Slovic</a>, Professor of Psychology, <a href="https://theconversation.com/institutions/university-of-oregon-811">University of Oregon</a></em></p> <p><em>Image credits: Shutterstock </em></p> <p><em>This article is republished from <a href="https://theconversation.com">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/people-who-are-bad-with-numbers-often-find-it-harder-to-make-ends-meet-even-if-they-are-not-poor-172272">original article</a>.</em></p> </div>

Money & Banking

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Are you financially literate? Here are 7 signs you’re on the right track

<p>With the cost of living and interest rates rising, a growing number of Australians are struggling to manage their <a href="https://www.smh.com.au/money/planning-and-budgeting/almost-half-of-australia-is-financially-stressed-here-s-one-way-to-fix-it-20221011-p5bowq.html">finances</a>. Many are experiencing real <a href="https://www.anu.edu.au/news/all-news/australians-under-increasing-financial-stress#:%7E:text=The%2520level%2520of%2520financial%2520stress,say%2520they%2520are%2520struggling%2520financially">financial stress</a>.</p> <p>But even in the best of times, managing your finances is hard. Every day, you’re making complex financial decisions (some of which carry huge ramifications) and there are more financial products and services available than ever before. Navigating this minefield can be overwhelming and lead to financial anxiety.</p> <p>Being financially literate helps. But what does “financial literacy” mean in practice?</p> <p>Here are seven signs you’ve got the basics covered.</p> <h2>1. You track your cashflow</h2> <p>By tracking your cashflow on a regular basis, you’re ensuring your expenses don’t exceed your income. In other words, you make sure you’re earning more than you spend.</p> <p>A good sign you’ve successfully managed your cashflow is that you have a surplus or a buffer.</p> <p>These left-over funds can be used to boost savings, pay off debt or meet other financial commitments.</p> <p>Cashflow management allows you to assess whether there are opportunities to increase your savings and/or reduce spending. Being able to manage your earnings and spending is a key financial skill.</p> <h2>2. You have a budget – and you follow it</h2> <p>Setting and following a budget requires financial discipline, which is a key part of financial literacy.</p> <p>By following a budget, you’re putting a measure in place to live within your means and reduce the risk of overspending.</p> <p>With all the competing demands that come with managing money, your budget can be a tool to keep you on track. And developing this habit over time can empower you to make wise financial decisions.</p> <h2>3. You understand the difference between good debt and bad debt</h2> <p>Love it or hate it, debt forms part of our financial portfolios and sustains the financial institutions we interact with. Knowing how to make debt work for you is a skill and a sign of good financial knowledge. It is crucial to understand the difference between good debt and bad debt.</p> <p>Good debt is debt used to improve your long-term financial position or net worth, such as a home loan.</p> <p>Bad debt tends to be consumption-driven and doesn’t have lasting value. Examples include payday loans or retail accounts.</p> <h2>4. You have your money in various places</h2> <p>One of the key concepts of financially literacy is understanding the importance of diversification.</p> <p>By having your money spread across various places (such as a savings account, property, the share market, superannuation and so on), you’ve reduced the concentration of risk.</p> <p>This helps protect your wealth in tough economic times.</p> <h2>5. You understand how financial assets work, along with their pros and cons</h2> <p>Financial assets refers to things like cash, shares and bonds. It’s important to understand how financial assets work and how they can either help or hurt your financial position.</p> <p>For instance, savings accounts are a safe financial instrument that earn interest on the amount accumulated within the account. But the fact they’re so safe also means that they won’t outperform inflation.</p> <p>This type of knowledge is an imperative part of financial literacy.</p> <h2>6. You’re aware of your financial strengths and weaknesses</h2> <p>Financially literate people reflect on their capabilities.</p> <p>When you can appreciate where your financial strengths and weaknesses lie, you can make better financial decisions and prioritise your needs.</p> <p>On the other hand, being oblivious to your strengths and weaknesses means you miss opportunities to improve your financial health.</p> <p>For example, perhaps you buy unnecessary stuff when you feel sad. Or maybe you panic when faced with tough financial choices and make quick decisions just to make the problem go away.</p> <p>Neglecting to reflect on patterns of behaviour can lead to serious and possibly irreversible financial mistakes.</p> <h2>7. You set financial goals and put measures in place to meet them</h2> <p>Financially literate people plan for their finances. This involves setting goals for either earnings, savings, investments, and debt management or putting measures in place to protect wealth (via, for example, insurance to protect your wealth against loss).</p> <p>Setting goals is one thing, but it’s also important to have a system and habits in place to achieve them.</p> <p>Make sure you understand what you’re trying to achieve with your goals, why the goals are important and how you’ll achieve them.</p> <p>Boosting your financial literacy can feel tough at first. But tackling your finances head on, controlling spending, participating in financial markets, handling debt, being able to understand financial assets and working towards financial goals can help you feel in control of your financial situation.</p> <p><em>This article originally appeared on <a href="https://theconversation.com/are-you-financially-literate-here-are-7-signs-youre-on-the-right-track-202331" target="_blank" rel="noopener">The Conversation</a>.</em></p> <p><em>Images: Getty</em></p>

Money & Banking

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You’re not tone deaf and you know more about music than you think

<p>Think of the last time you were at a birthday party and the obligatory rendition of “Happy Birthday” began. If you’re like most people, you probably joined in without a second thought. Would you be surprised to know that the version of “Happy Birthday” you’re used to singing might be different every time?</p> <p>The musical key that “Happy Birthday” is sung in often depends on the note that the person who starts the song chooses to sing first. This starting point determines the key for the rest of the song. We’re still able to recognize the song because the intervals — the differences in pitch between notes — remain the same and the notes just shift up or down depending on where that starting point is.</p> <p>This act of shifting pitches up or down but preserving the intervals between notes is called transposition and although it may not seem like a simple task, people tend to handle it quite well. In one study, <a href="https://doi.org/10.1037/h0094201">both children and adults easily recognized common songs like “Happy Birthday” and “Twinkle Twinkle Little Star” after they were presented at various keys</a>.</p> <p>How is it that most people can perform this complex musical task even in the absence of any formal musical training? Even though you may not realize it, you actually have a lot more musical knowledge than you might think.</p> <h2>Pattern recognition</h2> <p>Where does this knowledge of music come from? You get it from your everyday life without realizing it thanks to a process called <a href="https://link.springer.com/referenceworkentry/10.1007/978-1-4419-1428-6_1707">statistical learning</a>. This concept suggests that we learn about our environment through passive exposure and that we constantly use this knowledge to interpret the world around us. Statistical learning is how we learn to recognize patterns and can be used to explain complex learning processes like <a href="https://doi.org/10.1126/science.274.5294.1926">language acquisition</a>. Significantly, this process is almost entirely subconscious — we learn just by being exposed to new information.</p> <p>In the case of music, we have no shortage of experience to draw from. We hear music constantly, whether intentionally or as a bystander. Riding in a car, standing in an elevator, sitting in a waiting room — we can’t help but be exposed to music. And we gain something from this passive exposure: We become familiar with the patterns and regularities of the music of our culture and we develop an implicit knowledge of music.</p> <p>This process happens very early on. <a href="https://doi.org/10.1016/S0010-0277(98)00075-4">Eight-month-old babies can recognize patterns in sequences of tones</a> and some studies show that even at <a href="https://doi.org/10.1121/1.4973412">three months of age</a>, babies can recognize changes in short melodies. This implicit musical knowledge only grows as we get older and is why most people might not be as musically challenged as they think.</p> <p>In one study, people were recruited to sing in a public park and their performance was compared to that of professional singers. The results showed that the <a href="https://doi.org/10.1121/1.2427111">amateur singers’ pitch and timing accuracy was close to that of experts</a>. This aligns with other research showing that people without musical training also <a href="https://doi.org/10.1007/s00221-004-2044-5">perform well on pitch discrimination tasks</a> in which they have to recognize the difference between two tones that vary slightly in pitch.</p> <p>These results might seem surprising at first, but they are backed by large-scale studies as well. While many people might claim to be tone deaf, some research estimates that the rate of congenital amusia — a condition in which a person is unable to recognize or process musical information — <a href="https://dx.doi.org/10.1038/ejhg.2017.15">is less than two per cent in the general population</a>.</p> <h2>Cultural expectations</h2> <p>Our implicit knowledge of music also leads us to develop expectations of how music should sound. That’s why music from other cultures might sound strange at first — <a href="https://doi.org/10.1016/S0010-0277(98)00075-4">it deviates from the expectations you’ve developed based on the music of your own culture</a>.</p> <p>This is also true across musical genres. Jazz musicians were found to be <a href="https://doi.org/10.1371/journal.pone.0163584">more accurate at predicting changes in jazz music than classical musicians and non-musicians</a>.</p> <p>Our expectations are also responsible for generating <a href="https://doi.org/10.1523/JNEUROSCI.0428-19.2019">musical pleasure</a> and the desire to move when listening to music, and have been used as a tool by artists and composers for centuries to elicit stronger emotions.</p> <p>So although you might not be aware of it, you’re a walking music processing machine. And next time you find yourself singing “Happy Birthday,” you can sing a bit more confidently with your hidden music expertise in mind.</p> <p><em>Image credits: Getty Images</em></p> <p><em>This article originally appeared on <a href="https://theconversation.com/youre-not-tone-deaf-and-you-know-more-about-music-than-you-think-174453" target="_blank" rel="noopener">The Conversation</a>. </em></p>

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