Math Challenged Americans

In a recent article on CNBC, "Math-Challenged Americans More Likely to End Up in Foreclosure," reported the findings of "Numerical Ability Predicts Mortgage Default," from the Proceedings of the National Academy of Sciences.

The article reported the two big messages of the research. "First, numerical ability heavily correlates to mortgage default, even controlling for a lot of other things. Second, defaults were not driven by the mortgage choices people make. Their mistakes come somewhere else."

"To support their findings, the researchers examined actual mortgage payment data obtained from the Federal Reserve, and then surveyed mortgage holders to assess their math skills. Each were asked a series of five questions (see below) and then assigned to one of four "buckets."" 

"Roughly 1 in 7 test-takers couldn't answer two questions correctly, and landed in the lowest bucket. That group was four times more likely to be in foreclosure than consumers who landed in the top bucket by answering all five questions correctly."

"In 1988, mathematician John Allen Paulos in is book, "Innumercy," argues that being a math dummy in America is not frowned upon, like illiteracy. In fact, it can be socially desirable."

He wrote, "the same people who cringe when words such as imply and infer are confused react without of trace of embarrassment to the most egregious of numerical (errors)." He tells of an acquaintance who heard a weathercaster report a 50 percent chance of rain on Saturday and on Sunday and concluded that there must be a "100 percent chance of rain that weekend."

MATH SKILLS TEST

1. In a sale, a shop is selling all items at half price. Before the sale, a sofa costs $300. How much will it cost in the sale?

2. If the chance of getting a disease is 10 per cent, how many people out of 1,000 would be expected to get the disease?

3. A second-hand car dealer is selling a car for $6,000. This is two-thirds of what it cost new. How much did the car cost new?

4. If 5 people all have the winning numbers in the lottery and the prize is $2 million, how much will each of them get?

5. Let's say you have $200 in a savings account. The account earns 10 percent interest per year. How much will you have in the account at the end of two years?

Gallup Poll: Better Off This Year, but Not by Much

In an extremely close poll conducted by Gallup, Americans were asked about their opinion regarding their personal financial situation this year as compared with last;  are things better, worse, or the same?

38% of Americans described their financial situations as better than last year, jumping for the first time since 2008 over Americans who considered themselves worse off.  Considering the 4% points separating the two opinions, the finding is not abrupt, but signals questionably positive public opinion regarding the economy.

However, this sentiment splits down partisan lines.  62% of Democrats consider themselves better off this year, while only 16% of Republicans describe themselves similarly.  Conversely, 9% of Democrats find themselves worse off this year, while 55% of Republicans responded likewise.  Independents hover somewhere in the middle, with 40% sharing a worse off response and 34% self-describing as better off.  With opinions regarding present situations minimally optimistic, future predictions are quite high;  66% of respondents predict that next year will be better than this one, pulling in 57% of Republicans, 62% of Independents, and 80% of Democrats.

62 Percent of Parents Provide Financial Assistance to Their 19- to 22-Year-Old Children

On May 3^rd, USA Today focused on a University of Michigan study regarding the proportion of parents who provide financial assistance to their 19- to 22-year-old children.  The lead author of the study, Patrick Wightman, found that 62% of young adults collect funds from their parents.  About 42% of parents assist with bills, 35% pay for a portion of tuition, and 23% help with vehicle costs.  Additionally, a little more than one in five parents contribute to their children’s rent and 11% provide their kids with loans.  82 % of wealthier parents (those making $99,910 or more a year) supported their children with some form of financial assistance, compared to 47% of lower income parents (those making less than $37,274).  However, regardless of wealth, parents who provided money to their children sent an equal share – about one tenth – of their income.