Lordie! Have you seen Free Money Finance’s gasp of astonishment at the latest revelation of Americans’ stunning ignorance of things financial?
Really, it’s just a hint: three surprisingly simple questions that require one to think logically, in a very vague way, about interest, inflation, and investing. Only 30 percent of 1,488 adults could answer all three “duh!” questions correctly, and less than half could answer the two that addressed interest and inflation. Amazingly, only half could say whether ’tis better to have all your financial eggs in one basket or to diversify a bit.
FMF concludes, as do a large number of his commenters, that the nation needs “a big dose of financial education.”
Probably so.
Some of FMF’s readers think the 70 percent of survey respondents were “stupid,” no “smarter than a fifth-grader,” and “the ‘greater fools’ that allow bubbles to happen.”
Now that, I doubt. The community college students I teach are exactly the sorts who would get these answers wrong: people whose K-12 training left something to be desired, or folks for whom academics weren’t a top priority until they realized they need a degree to get a decently paying job. They may not be well educated, but neither are they stupid. Many are very smart, indeed.
This very morning I spoke with a young man and one just verging on middle age, as we stood in the hall waiting for our classroom to clear out. The subject of debt, savings, and the cost of living came up. As they spoke, it became clear that neither man could even conceive of ever earning enough to have something to put aside for the future. The reason that’s so is not that they’re stupid or “greater fools,” but that they’re undereducated.
When almost half of some 1,500 adults can’t tell that $100 invested at 2 percent a year would amount to more than $102 after five years, the problem is that they can’t do the most basic arithmetic. It means something like half of Americans don’t understand decimal fractions or simple multiplication.
There’s stupidity at work, all right. But it’s not among the current generations. The stupidity is on the part of leadership that hasn’t been competent to build and maintain a decent public school system. This is a direct cause of the naïveté that led American consumers to be gulled into buying suspect and downright bogus financial instruments, the very instruments that led to the late crash and the present endless recession. And frankly, if what’s going on in my state is any indication, I don’t see an end of stupidity in sight.