Smarter doesn't mean richer

By Jeremy M. Simon

The results of a recent study shows that people blessed with intelligence are not necessarily free from financial woes.

Research by an economist at Ohio State University's Center for Human Research, detailed in an upcoming issue of the journal Intelligence, indicated that the smart may still suffer monetarily -- making their own financial lives difficult by doings things like maxing our their credit cards and missing bill payments.

While past studies have shown a link between being smarter and earning more money, that doesn't mean that those who are intelligent and wealthy don't suffer from debt. Generally, respondents with higher IQ scores earned higher income, with each addition IQ point adding $202 to $616 in income annually. 

However, the study demonstrated that there was no link between total wealth and a person's IQ.  With research showing that individuals with higher IQs are not significantly better off financially than those with average or below average intelligence, the suggestion is that those who are smarter may not be as good about saving money as others.    

In fact, the researchers discovered that more intelligent people were actually slightly more prone to financial problems, with more than 12 percent of those with an IQ of 90 having maxed out their credit cards, versus less than 8 percent of those individuals with an IQ of 75 and below.

Among the highly intelligent, or those respondents with an IQ topping 125, 6 percent had maxed out credit cards and 11 percent occasionally missed payments.

Additionally, there appeared to be a financial sweet spot near the average IQ score, for which individuals had the lowest financial distress. 

The survey looked at information provided by 7,400 respondents who took part in the National Longitudinal Survey of Youth, which considered baby boomers nationwide.  The latest study is based on data from 2004, when participants were 40 to 47 years old.

Respondents were polled about income and total wealth, as well as three measures of financial distress: whether they had maxed-out credit cards, if they missed paying bills during the past five years and if they had ever declared bankruptcy. 

The Armed Forces Qualification Test, long used to measure intelligence, was used to generate IQ scores.

As a takeaway, the study's author, economist Jay Zagorsky, stated that people with lower intelligence should not feel like they are at a financial disadvantage, while those people with a high IQ should not feel they are at an advantage.

In other words, every person has the ability to make smart financial decisions like avoiding debt, regardless of their intelligence or their income.

Published: May 14, 2007

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