According to the results of a study conducted at Ohio State University’s Center for Human Resource Research, super-intelligent people are only as good as (or as bad as) people with average or below-average intelligence, when it comes to better management of finances.
The study concludes that, generally, income increases with IQ; but, the increased income does not necessarily translate into increased wealth (by “wealth” the study means “net worth”). It also says that people with high IQ are not consistently better than people with low IQ at staying away from financial distress - as measured by problems like maxed out credit cards, late bill payments, and bankruptcy.
The way I see it, the report serves as a note of caution for seemingly *intelligent* people with high IQ (who think that just being smart can make them rich) and a word of encouragement for seemingly *less intelligent* people (who may not be confident enough in their approach towards becoming rich).
If you think about it for a while, the findings don’t seem too surprising. Below are some of the essential characteristics of people who are on the path to financial prosperity. I don’t see any reason why a person with low IQ will possess these characteristics to a lesser extent than a person with very high IQ.
- Ambition: somewhere deep in you, there has to be this powerful drive to excel financially. Intelligence alone does not guarantee this drive.
- Energy, willpower, and discipline: you need to put your thoughts (and/or *intelligent* analysis) into action. There is a big difference (usually recognized as “results“) between just *knowing* about things and implementing them. Also, once you find the right direction, you need to keep pushing to make progress along that direction - that requires quite a bit of discipline.
- Emotional stability: from what I have observed, a whole lot of *intelligent* people lack this (by the way, although I don’t consider myself to be intelligent, I do have some issues in this area that need to be addressed). Recently, JD of Get Rich Slowly elaborated on this subject (incidentally, the post was a review of the book titled “Why Smart People Make Big Money Mistakes“).
A couple of other important factors that might keep super-intelligent people from becoming wealthy are: ego and overconfidence. It’s not too difficult to find intelligent people with this written all over their foreheads: “I am intelligent; hence, I must be right. Everyone else must be wrong“.
Of course, there is this other thing called common sense which cannot be judged by IQ tests. And, there is this whole bag of vices like procrastination, impulsive behavior, etc., which can become a burden for anyone - irrespective of his/her IQ. Personally, I still have a lot of things in my bag of vices, and I don’t foresee much financial progress before I empty it. My intelligence (or whatever is left of it) is immaterial in this situation.
Jay Zagorsky (the scientist who conducted the research), summarizes the study very well:
Your IQ has really no relationship to your wealth. And being very smart does not protect you from getting into financial difficulty.
Intelligence is not a factor for explaining wealth. Those with low intelligence should not believe they are handicapped, and those with high intelligence should not believe they have an advantage.
That gives me some hope. 
Some Totally Tangent Discussion
Interestingly, for the sake of entertaining ourselves, this leads to two contradictory statements:
- It is dumb to be smart but not wealthy.
- It is smart to be dumb but wealthy.
On a cautionary note, attributing *smartness* to just being wealthy is a tricky business. I am sure there are smart people in this world for whom accumulating wealth is not a priority. This may sound absurd to a whole lot of people who are interested in personal finance - but after a few years in grad school, it sounds perfectly normal. 
On a more fundamental level, the reason behind the results of the study coming out the way they did, could be our interpretation of the human intelligence as scaled by the conventional IQ tests. As far as my perception goes, such tests are pretty narrow in scope, and probably favor book-smarts over street-smarts, even though people in both categories may be almost equally “intelligent” [sort of .. the difference between Sherlock Holmes and Mycroft Holmes - for those you are familiar with these characters].
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Very interesting and thought provoking.
You may be interested to know that current (for the last 20+ years) educational theories hold to the concept of multiple intelligences: “book smarts” is really only one small set of intelligences and doesn’t include mechanical intelligence, artistic intelligence, spacial intelligence…
You get the idea. Maybe financial intelligence needs to go into the pot, something some people are naturally good at, others need to work harder at, and a few never will be completely competent in.
stidmama, I think financial intelligence may be a second order intelligence, the sum of behavioral and emotional intelligences. I suppose though that there has to be just enough book smart intelligence to do accounting math.
stidmama: That makes sense. And I am not sure an IQ test determines these various types of intelligences. There must be something like financial intelligence - I am sure someone will come out with that finding very soon. More than terming it financial “intelligence”, I am financial “acumen” - may be, that’s the next level of financial intelligence.
Steve: Agree with you - financial intelligence might be a second order type; however, I am not sure a sum of which other components - behavior and emotions are just two (of many) essential parts towards a good financial situation.
Also, to make the point again, just having the financial *intelligence* won’t mean much without the will to put that intelligence to work.
Since smart people have a higher income, they have the “chance” of gaining more wealth because they theoretically can save more. The fact that they don’t is a little surprising though since I see many poor people that I think aren’t too bright but most of the rich people that gained wealth themselves (ie didn’t inherit or married into the wealth) are very smart.
If you have a high income you can quickly restore lost wealth.
“I am sure there are smart people in this world for whom accumulating wealth is not a priority.”
I think this may be the biggest factor. If intelligent people have higher incomes, but no more wealth, they are obviously spending more money. When spending money, there is usually some value obtained in the exchange. This value may lead to a high quality of life. For instance if you found out that intelligent people take more vacations, you might conclude that they are more wealthy… that wealth might not be reflected in their bank accounts.
That was a wonderful study. I agree with the whole thing seeing I see these types of results in real life with people that have a farily high IQ yet they don’t know how to manage their money.
Spending rises to meet income. If you “spend” money on your savings and retirement you will become wealthy, regardless of salary or intelligence. If you spend money elsewhere, you will not become wealthy.
I disagree that “finance” is its own type of intelligence because I believe that intelligence is innate, but knowledge and wisdom can be acquired. One can certainly become better at finance regardless of how smart they are, but one cannot become more intelligent.
I don’t see any reference to attitude to risk here. I think this is also a determinant in how successful (or otherwise) people can be in a financial sense.
Those who can manage risk to their advantage will be more likely to make greater returns as they are greater risk takers.
You guys are missing the point. If there is little or no correlation between IQ and wealth, then maybe there is another explanation: luck. I have seen wealthy people who aren’t very bright, but just have incredible luck: in the right place, have the right friends, etc. What IQ CAN do is help you profit when good luck happens. But when bad luck happens to you (divorce, job loss, illness, etc.) no amount of IQ is going to avoid the situation.
I always say I would rather be lucky than good.
Why mightn’t there be a relationship between intelligence and wealth? Aside from intelligence, you have correctly identified some of the essential characteristics that the wealth aspirant requires.
Even intelligent people have emotions that can prevent them standing back and see how to use their time more productively instead of falling into the trap of wasting too much time saving. They don’t realize that saving money might cost you more than you think!