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How 'math anxiety' costs us money

Researchers say our fear of arithmetic causes us to choose deals that aren't really deals. Another study says poor math skills increase the likelihood of defaults.

By Donna_Freedman Jul 1, 2013 9:48AM

Logo: Sale tags (Image Source/Corbis/Corbis)You're shopping for dress slacks and find two styles you like for $59.99 -- and they're both on sale! One brand is $15 off; the other manufacturer offers a 33% discount. Which do you choose?

If you're a savvy shopper you'd whip out the cell-phone calculator, or maybe even do the math in your head. What's more likely is that you'd choose the $15-off slacks, even though the other pair is actually the better deal ($40.20 vs. $44.99).

The average consumer's "math anxiety" often means taking the easy option (i.e., dollar-formatted) even if the person is capable of doing the math, according to research led by Rajneesh Suri of Drexel University.


Occasionally I see store signs that translate percentages-off into actual dollar amounts for the objects on sale. More often retailers seem assume we know basic arithmetic. Or maybe they're counting on (as it were) that math anxiety.

Paying an extra $4.79 on slacks may not seem like a big deal, but it adds up over time. And if a second group of researchers is to be believed, people with poor math skills are five times more likely to default on their loans


"Numerical ability predicts mortgage default," published recently in the Proceedings of the National Academy of Science, was based on interviews with several hundred U.S. residents who got mortgages in 2006 and 2007. The conversations included questions designed to determine numerical and cognitive abilities.

One-fourth of the lowest-scoring borrowers had defaulted within five years. By contrast, only 5% of the highest scorers defaulted.

Incidentally, the type of mortgage didn’t matter: "Those lacking (math skills) will still get in more trouble later on even if they pick a plain vanilla mortgage," said co-author Stephan Meier, an associate professor at Columbia Business School.

Do the math

Several hundred people is a fairly small study. But it's not surprising that if you can't handle numbers you'll struggle with dollars and cents.

On one of my previous posts about retail math, a reader left a comment about getting a 3% rebate on gasoline with a rewards credit card -- and the co-worker who insisted that her 3-cents-per-gallon discount with a store loyalty card was the same thing.

Um, no. The rebate was on the total purchase: 3% of 10 gallons of gas at $4 per gallon equals $1.20, vs. a 3-cent-per-gallon discount that amounts to 30 cents. Until the reader took out pen and paper to demonstrate this mathematically, the co-worker insisted that "3% and 3 cents are the same."

Retail math can be tricky if you aren't paying attention. Does the "6 for $10" sale price make some arithmetically impaired folks think each one is 60 cents?

A supermarket's unit pricing tags may list one product's price in terms of ounces and a competing brand's in quarts. If a sign says "save an additional 20%" on an item that's already 50% off, you won't be saving 70% total.

Making monthly car insurance payments may seem easier on the budget than a bigger payment twice a year, but you'll pay more overall. That low monthly payment in the automobile ad is probably based on a 72-month loan (bad idea), but once in the dealership you're likely to be dazzled by the pretty new cars and the super-friendly salesperson. (He's such a nice guy he wants you to have a new car today!)

Not stupid, just susceptible

Math-based marketing favors retailers because consumers "make decisions based on clues and half-thinking that amount to innumeracy," notes Derek Thompson of The Atlantic in an article called "The 11 ways that consumers are hopeless at math."


What he calls "the shopping brain" is easily fooled by things like:

  • Comparisons. If the first item you see costs $5,000 you might snort. Then you see something you love and it's "only" $220. What a steal!
  • Extremes. If it costs too much or too little we get nervous. Something in the middle seems like a reliable price (even if it's no better than the "cheap" one).
  • The number 9. Somehow $19.99 sounds cheaper than $20. (It's only a penny, folks.) That makes it feel like a deal even if it isn't. 
Such reactions to marketing doesn't mean we're stupid, Thompson notes: "Just susceptible."

Tools exist to help anyone whose number skills aren't the best. For example, MSN Money has calculators for compound interest, life insurance, auto or student loans, long term care insurance, tax withholding, college savings and other personal finance topics.

The calculators in smartphones and tablets can help you when you're out and about. (Why pay more for those slacks than you have to?) Pay attention to other marketing tactics, too. "Buy one and get 50% off the second" sounds a lot sexier than "save 25% on each of two items."

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Jul 1, 2013 4:57PM
I carry a very small calculator in my handbag at all times for this reason
Jul 1, 2013 3:52PM
Math anxiety? If the lack of the ability to do a simple math problem is going to be renamed, then I suppose the lack of mental capacity and/or mental laziness in every other area will have to be named as well.  Then you can pass a law naming them as disabilities.  Who writes this stuff?  I can write too:  People the world over are finding out that their unwillingness to perform even the most basic math calculations are costing them money, but we also found in our research that they don't care.  One store has an item for $1.59 and another store has the same item for 6 for $10.00.  The consumers purchased the items at the store selling them at 6 for $10 regularly showing what?  That they didn't want to waste gas driving to another store to save .46.  That's the general consensus.  Sometimes we know that an item is more expensive, but it isn't worth our time to make a special trip, or maybe we purchased the  more expensive item because we didn't like the extra packaging that came on the individually wrapped product.  Who cares?
Jul 1, 2013 4:17PM
one book I read called the interest direct helped me out a lot with home loans
Jul 1, 2013 6:56PM
People who are really dumb when it comes to math deserve to lose money on bad deals.

Just the price you pay for being stupid.
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