Why a head for figures is good for your wealth

Click to follow

It's bad news for creative arty types, good news for accountants. Researchers have discovered that numeracy, rather than literacy or pure intellectual power, is the key to accumulating wealth and ensuring a comfortable retirement.

A team from the Institute for Fiscal Studies and University College London have found that in the years leading up to retirement "those who are more numerate accumulate financial assets at a faster rate than those who are less numerate", and detect a strong correlation between a facility with numbers and economic and financial literacy.

They argue this has become much more important when individuals have to make more choices on investments and retirement planning than in the past. Numeracy pays its biggest dividends in old age – almost 80 per cent of income for the least numerate group comes from the state, compared with approximately 30 per cent for the most numerate group. Similar research in the US suggests that the more numerate households are worth some $22,000 (£14,000) more.

The authors of the study, James Banks, Cormac O'Dea and Zoe Oldfield said: "As the UK has moved towards a system of individual provision for retirement income, the importance of an individual's or household's ability to make the right choices when it comes to providing for their retirement has increased."

One solution for those who are hopeless at maths is to marry someone who has discovered the magic of compound interest or unlocked the mysteries of pound-cost averaging.

"One may not need to be particularly numerate if one is married to someone who is so, and they are taking an active role in the management of household saving and consumption decisions," the report authors found.

Numeracy is the key factor, rather than intelligence or educational achievement. The authors say that literacy, memory function and executive ability are less important.

The researchers suggest a more "paternalistic" approach to making the less numerate save more, given the "strikingly low levels" of financial nous among large sections of the population. In one example, 30 per cent of low financial literacy households said they had a fixed rate mortgage when in reality it was variable rate.

Financial education was due to become a compulsory part of the curriculum in schools from September next year, but the plan was scrapped at the end of the last parliament.

Economic literacy in the UK is low by international standards. Britain lies in 30th place in a survey of 54 nations, slotting between Hungary and Slovakia, and behind the US, Germany and – somewhat surprisingly given its current economic woes – Ireland. Singapore is regarded as the most economically literate place on earth – it is also one of the wealthiest nations per head.

Virginia Wade

The tennis player, who is still the last British person to win a full Wimbledon singles title, gained a BSc in mathematics and physics at the University of Sussex, graduating in 1966.

Art Garfunkel

One half of the pop duo Simon & Garfunkel, he also studied an MSc in mathematics at Columbia University in New York. He also started working on a PhD, but quit early to pursue his music career.

Leon Trotsky

The revolutionary began a maths degree in Odessa in 1897. His studies were cut short by his exile to Siberia.

Michael Jordan

The basketball star started a maths degree at the University of North Carolina but changed to cultural geography during his first year. He went on to become a success in sponsorship terms for Nike, and is now a businessman with a controlling stake in the Charlotte Bobcats basketball team.