Brainpower and Bankruptcy
Being smart seems to help when it comes to amassing wealth, but brains don't necessarily shield people from financial disaster.
THE SOURCE: “Do You Have to Be Smart to Be Rich? The Impact of IQ on Wealth, Income, and Financial Distress” by Jay L. Zagorsky, in Intelligence, Sept.–Oct. 2007.
It’s not necessary to be smart to be rich, but it sure helps. Every additional IQ point correlates with an additional $234 to $616 a year in income among younger baby boomers, writes Jay L. Zagorsky, a research scientist at Ohio State University. But brains don’t necessarily protect people from financial distress.
People with IQ scores slightly higher than the average (100) are least likely to live beyond their means. Within both the below-average and above-average intelligence groups, however, the likelihood of financial distress generally rises with IQ scores.
Geniuses and near-geniuses—those with scores of 140 and above—are the most likely of all IQ groups to max out one or more credit cards and to miss payments or be more than two months late. They’re less likely to declare bankruptcy than the average person, though 14 percent of them do succumb.
Intelligence alone doesn’t explain why individuals succeed or fail in economic life. Behavior matters. For every additional year a person can grind out in school (beyond a certain point), the reward is more than $2,200 in net worth. Divorce slashes worth by more than $28,000. The real explanation for economic success may well rest on psychological factors, such as a person’s desire for immediate satisfaction, tolerance of risk, or ability to reject social influence, Zagorsky says. And don’t discount luck, timing, and parents.