Study: It doesn’t pay to be smart

Study: It doesn’t pay to be smart

If you’re so smart, why aren’t you rich? Although money and mental muscles
may seem a natural match, brains, alas, may be more hindrance than help
when it comes to getting rich, concludes a new study in the journal Intelligence.

is still not well understood why some people are rich and others are
poor," writes study author Jay Zagorsky of Ohio State University.
"Luck, timing, parents, choice of spouse and many other factors play
important roles in shaping an individual’s circumstances," he
acknowledges in his study, which looks for a link between intelligence
scores, wages and wealth.

Past analyses have
mostly just looked at income, with studies of World War II veterans
finding a link between smarts and a better salary. The controversial
1994 book, The Bell Curve, by Richard Herrnstein and Charles
Murray, went further, arguing that few high-IQ types end up in poverty.
Within a few years, that conclusion was later found lacking by Cornell
University economist John Cawley and others.

what good is it to be smart and have a better salary if you end up
broke or spending it all on credit card bills? asks Zagorsky. Looking
at the National Longitudinal Survey of Youth 1979’s latest round of
survey answers from more than 7,000 randomly-selected participants, he
tries to tackle the question of whether better IQs lead to bulging bank
accounts and less bankruptcy. (Funded by the federal Bureau of Labor
Statistics, the NLSY 1979 has questioned the same people 21 times from
1979 to 2004, with participants now ranging in age from 33 to 41 and
almost evenly split between men and women.)

answer is no. "Being more intelligent does not confer any advantage
along two of the three key dimensions of financial success (income, net
worth and financial distress)," Zagorsky finds, looking at the data
with statistical tests. Income does weakly correspond to intelligence
test scores, he finds, where "a one point increase in IQ test scores is
related to an income increase of $346 per year. But at most, that same
one-point increase in IQ leads to "a net worth increase of at most $83,
but probably zero."

when it comes to financial distress, smarts are no help at all. People
with 140 IQ scores (a score of 100 is average) missed payments and
maxed-out their credit cards more often than their lower IQ
counterparts. They went bankrupt at a rate, 14.1%, close to the rate of
people with an IQ of 80, 15.2%. "Only among people slightly
above-average does an increasing IQ score lead to a reduced chance of
financial distress," says the study. "The survey provides no data to
explain why this occurs," but Zagorsky offers these explanations for
High IQ types getting into financial hot water:

— They might be busier and less focused on routines like paying bills.

They might lead a lifestyle that is closer to the financial precipice
because they feel they are smart enough to get away with the risks of
credit card spending and saving less.

— They may have a better memory and are more likely to remember financial mistakes on their surveys.

much for smarts. On the plus side, Zagorsky’s study does offer some
comfort for those of us less IQ-endowed folks. "Since intelligence is
not a factor for explaining wealth," he writes, "individuals with low
intelligence should not believe they are handicapped in achieving
financial success, nor should high intelligence people believe they
have an advantage."

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