[Jul 12th 2007]Poor young things,Where money seems to talk

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Financial education

Poor young things

Jul 12th 2007
From The Economist print edition

Teenagers need to do better at maths to avoid a bleak financial future

WHEN today's youngsters leave school they can expect a lot less hand-holding about money than their elders used to get. Few employers still bear the investment risk for pensions, since most final-salary schemes have been closed to new entrants. Easy credit is on tap and mortgage lenders are offering loans worth five times annual earnings.

십대들은 금융에 대한 어려움을 피하기 위해 수학을 더 잘할 필요가 있다. 오늘날 젊은이들이 학교를 떠날때 그들은 이전 세대들보다 훨씬 적은 돈을 소유할것으로 예상할 수 있다. 대부분의 마지막 급여계획이 새로운 가입자에게 폐쇄된 이후로 극소수의 고용주만이 여전히 연금에 대한 투자위험을 가지고 있다. 손쉽게 신용대출이 가능하고 저당대출자들은 연수입의 5배까지 대출을 제공한다.

 

So it is worrying that the evidence suggests that young people are less canny about money than older ones, who in their turn are hardly financial whizzes. In 2006 the Financial Services Authority, the industry regulator, surveyed the nation to discover how well people managed their finances and how much they knew about money matters. It discovered that almost half the population had no savings at all, including plenty of people on above-average incomes.

따라서. 젊은이들이 이전 세대보다 돈에 대해 신중하지 않다는 증거들은 염려스럽다. 2006년 FSA는 얼마나 국민들이 그들의 금융자산을 잘 관리하고, 돈에 대해 얼마나 알고있는지 설문조사를 하였다. 결과는, 거의 절반에 가까운 인구가 저축을 하지 않으며, 그 절반에는 평균이상의 소득자들도 포함되어 있다.

 

One person in five couldn't tell what inflation of 5% and an interest rate of 3% would do to the buying power of their savings. One in ten couldn't work out whether a discount of £30 on a television originally priced at £250 was better or worse than a 10% discount.

Younger respondents turned out to be worse at budgeting and basic arithmetic than older ones. True to stereotypes, they were particularly over-represented among the four in ten who agreed that they tended to live for today and let tomorrow take care of itself.

다섯명 중 한명은 5%의 물가상승률과 3%의 이자율이 그들의 저축에 구매력에 무슨 짓을 하는 지 대답하지 못했다. 10명 1명은 원래 250파운드인 TV를 30파운드 할인하는 것과 10%할인 하는 것 중 어느것이 나은지 계산하지 못했다.

젊은층이 기성세대보다 기본적인 산수와 예산책정에 있어 문제가 있다고 밝혀졌다. 전형적으로, 그들은 특히 10명 중 4명이 내일보다는 오늘을 추구하는 것으로 부각되었다.

 

The increasing uncertainties young people face, together with the evidence that they are ill-equipped to deal with them, have led to a growing consensus that better financial education is needed. On July 12th an answer of sorts came in a syllabus for a new secondary-school subject. “Economic well-being and financial capability” is to be taught from 2008. Topics include personal finances, dealing with risk and becoming a critical consumer of goods and services. And from 2010, to get aGCSEin mathematics, 16-year-olds will have to study “functional mathematics”, likely to include sums involving budgets, interest rates and inflation.

 

Simply lecturing teenagers about the import!ance of saving for a pension is unlikely to help, though; they will probably dismiss such matters as irrelevant to immortal beings such as themselves. And personal finances and pensions are often perceived as boring, says Rachel Thomas, who editsPlus, a magazine about maths and its applications. “Our readers are keener on computer-generated imagery in the movies, black holes and the maths of climate change.”

 

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In any case, financial products change so fast that any specific information is likely to become outdated. Had today's 25-year-olds been taught about final-salary pension schemes in school, the information would have had little effect other than to highlight what a raw deal they can expect in comparison with their elders.

 

There is also the problem that financial education is of little use unless children have grasped some elementary mathematical concepts. Here, schools have plenty of room to improve. One child in four leaves primary school without having reached the expected standard in maths and British teenagers do poorly on international comparisons.

 

So perhaps the forthcoming review of primary maths teaching announced by Ed Balls, the new schools minister, on July 10th is good news. Or perhaps not. His Tory opposite number, Michael Gove, pronounces himself deeply unconvinced that yet another in a long line of reviews will improve matters. “We've had the intensive numeracy strategy in 1998, then Maths Year 2000, then Gordon Brown's response to the Roberts review on maths teaching in 2002, and in 2005 a new strategy that prioritised the small-group teaching of maths,” he points out.

 

No doubt Mr Balls is hoping for a rabbit to be pulled out of a hat, as happened with a similar review in 2006 of the way reading is taught in primary schools. That recommended a return to traditional teaching methods and the increased use of “synthetic phonics”—sounding out letters and syllables—in place of the methods that became popular in the 1960s, when children were taught to recognise whole words and resort to guessing when they got stuck. He is likely to be disappointed. Mathematics education never succumbed to such fads—perhaps because few of the trendiest educationalists were much good at the subject.

 

The real barrier may be teachers' lack of numeracy. On July 10th a report by Politeia, a think-tank, said that a third of primary teachers do not have twoA-levels, and that among those who did, few had studied maths or science pastGCSE.

 

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Polls, wealth and happiness

Where money seems to talk

Jul 12th 2007
From The Economist print edition

AP

The rich are different from you and me—and they say they are happier

EVERY summer, the world has its temperature taken twice—once by climate scientists, literally; a second time by opinion pollsters, metaphorically. This year two new surveys have thrown up a lot of fresh data on how the world really feels. And they have, so the pollsters say, cast some unexpected light on the link between wealth and happiness.

 

Ever since social scientists at the University of Pennsylvania found that mansion-dwelling American millionaires are barely happier than Masai warriors in huts, some economists have been downplaying the link between cash and contentment. In a 2005 book, Richard Layard, a British scholar, said family circumstances, employment and health all mattered more to a sense of well-being than income. Rich countries might be happier than poor ones, but beyond a threshold, the connection weakens, and more cash would not buy more happiness—so the theory goes.

 

The new polls cast some doubt on that school of thought. They add weight to the contention that growth and income play a big part in boosting people's satisfaction with life and their attitude to the future.

 

One of these surveys claims to be the first genuinely global opinion poll. Called World Poll, and conducted by the Gallup organisation, it spans 130 countries, many of which are being polled for the first time. Other surveys are smaller. The respected Global Attitudes Survey of the Pew Research Centre, an offshoot of an American charity, operates annually in just over 50 countries. The World Values Survey run from the University of Michigan is more comprehensive (over 80 countries), but updated only once in five years.

 

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Gallup's pollsters asked a standard question: how satisfied are you with your life, on a scale of nought to ten? In all the rich places (America, Europe, Japan, Saudi Arabia), most people say they are happy. In all the poor ones (mainly in Africa), people say they are not. As Angus Deaton of Princeton University puts it, a map of the results looks like an income plot of the world (see map). There are some exceptions: Georgia and Armenia, though not among the world's poorest states, are among the 20 most miserable. Costa Rica and Venezuela, though middle-income countries, are among the 20 happiest. The Brazilians, pictured above, seem a bit more cheerful than their income level justifies.

 

But in general, declared levels of happiness are correlated with wealth. The pattern also seems to hold true within countries, as well as between them. Rich Americans are happier than poor ones; rich Brazilians happier than poorer ones.

The other new survey, by Ipsos, confirm!s the picture. Top of its list of 20 countries ranged by happiness is the rich Netherlands (with Gallup, it is Finland); China is bottom. The survey also asked questions about confidence in the future, whether your children will be better off than you are, and so on. Regardless of countries' current income, there was a close correlation betweenGDPgrowth and optimism, with China, India and Russia most optimistic; France, Germany and Italy were the least. If both polls are right, the Chinese are pretty miserable now but they expect a dramatic turn for the better.

 

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The Ipsos poll is not strictly comparable to Gallup's because (for the first time) it asks questions of what Ipsos calls “leaders and shapers of public opinion”, mostly business people and politicians. This group has distinctive views—it takes a loftier view than the general population (see table). The gap between elite and popular perceptions is especially sharp in Russia, India and China. In those countries, top people's attitudes are far more upbeat than those of the general population. In Europe and America, the attitudes of the elite are roughly in line with—or slightly more pessimistic than—society as a whole.

 

 

In fairness, the “new happiness” economists, such as Mr Layard, never claimed there was no connection at all between money and feeling good. What they have said is that once people climb out of poverty, the link is weak, and may not work at all above a certain point (as one British pundit put it, extra money “is now proved beyond doubt not to deliver greater happiness, nationally or individually”). The evidence for this comes from surveys in most rich countries (such as America's general social survey), which show that happiness has been flat for decades, even though incomes have risen sharply.

 

On the face of it, the new findings are a counter-point to the earlier data. If the richest countries report greater “happiness” than moderately rich ones, that would suggest there is no quantifiable level of income at which extra cash fails to deliver extra contentment. Still, the latest findings don't invalidate the historic experience of particular countries—like the United States—which have surged to greater levels of wealth without experiencing any rise in general levels of reported happiness.

 

But if you treat history as bunk and concentrate on the levels of satisfaction that countries feel right now, the results are—in Mr Deaton's view—quite striking. He has compared Gallup's satisfaction score with national income based on purchasing-power parities, and got a close fit.

 

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So what should one make of the contradiction between these surveys and previous evidence? Definitional problems may provide part of the explanation. These are self-reported polls and people mean different things by “happiness”. Cultural problems are likely to be much greater when 130 states are involved.

 

 

Another possibility is that “happiness” is really a proxy for something else, such as health. Perhaps the main point is that money mitigates poor health, so the rich are happier than the poor mainly because they feel healthier. But that cannot be the whole story. More than half the 20 countries with the lowest level of satisfaction with health are in the ex-Soviet Union or eastern Europe though in statistical terms they seem relatively well off. In contrast, much poorer African countries (with a far higher incidence ofHIV/AIDSand other diseases) express higher levels of health satisfaction. Expectations, or memories, may be at work: medical woes in an ex-communist state feel worse because people recall, albeit through rose-tinted spectacles, an era of full health coverage.

 

Lastly, as the Ipsos poll clearly shows, happiness and optimism are not just different, they can be contradictory. The Chinese are dissatisfied but upbeat; Europeans are happy now but dread tomorrow. Many links between happiness, income and optimism have yet to be teased out. This new data—though not the last word on the subject—should help.