Studies on Poor Math skills lead to poor financial outcomes

Posted by Mohit S. Jain on March 06, 2024


Math proficiency

The correlation between poor math skills and negative financial outcomes is well-documented in academic research. Below are summaries of a few studies that delve into this relationship, highlighting the significance of math proficiency on financial decision-making and economic well-being:

  • "Numeracy, Financial Literacy, and Financial Decision-Making" by Annamaria Lusardi and Olivia S. Mitchell (National Bureau of Economic Research, 2011)

    • This study explores the relationship between numeracy (basic math skills), financial literacy, and individuals' ability to make sound financial decisions. The authors find that lower numeracy is significantly associated with less financial planning and poorer investment decisions, suggesting that enhancing math skills could improve financial outcomes.

    • Source: NBER Working Paper No. 17078

  • "The Importance of Numeracy in Predicting Risk and Time Preferences" by Catherine Eckel and Philip J. Grossman (Journal of Economic Psychology, 2008)

    • This paper examines how numeracy affects individuals' understanding and perception of risk and time, which are critical components of financial decision-making. The findings indicate that individuals with higher numeracy levels are better at evaluating risks and making intertemporal choices, leading to more advantageous financial outcomes.

    • Source: Journal of Economic Psychology, Volume 29, Issue 6, December 2008, Pages 762-776

  • "Financial Literacy, Financial Education, and Downstream Financial Behaviors" by Daniel Fernandes, John G. Lynch Jr., and Richard G. Netemeyer (Management Science, 2014)

    • This meta-analysis of 168 papers evaluates the effect of financial literacy and education on financial behaviors. It concludes that while higher financial literacy, underpinned by basic math skills, generally leads to better financial behavior and outcomes, the effects vary across different contexts and populations. The authors emphasize the need for targeted financial education that improves numerical ability as a means to enhance financial decision-making.

    • Source: Management Science, Vol. 60, No. 8, August 2014, pp. 1861-1883

  • "Mathematics Education and Financial Outcomes: Evidence from a High School Curriculum Mandate" by Shaun Dougherty, Joshua Goodman, Darryl Hill, Erica Litke, and Lindsay C. Page (Journal of Human Resources, 2020)

    • This study investigates the long-term financial impacts of requiring higher-level math courses in high school. It finds that students who were exposed to more advanced math classes were more likely to exhibit better financial outcomes in adulthood, including higher credit scores and lower foreclosure rates. This underscores the importance of math education in preparing individuals for successful financial management.

    • Source: Journal of Human Resources, 2020

These studies collectively underscore the critical role of math skills in shaping individuals' financial literacy and decision-making capabilities, which in turn influence their financial health and stability. Enhancing math education can be a vital strategy in improving economic outcomes at both the individual and societal levels. You must make sure your child develops a solid proficiency in Math. 

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