Mathematics is not optional

This question keeps returning: do we need kids to learn this much mathematics? And does it have to be obligatory at the matura? In other words, how much is mathematics useful for an average adult, who doesn’t use it professionally? Turns out, a lot.

Take one of the biggest financial commitments many (most?) people will make in their lives: a mortage. Thirty years of paying for one’s own place to stay. Actually, probably longer than that, since people will move to bigger appartments, extend their mortages, refinance etc. It’s a lot of money spent over decades, perpahs until or into their retirement age.

Now banks, like any for-profit company, will want you to choose their offer over competitors’. God forbid you to try shop around. If they just offered you an interest rate and calculated the monthly payment you would’ve been able to compare thease easily across multiple banks and choose the one that’s lowest.

It doesn’t work this way.

Typically, a mortgage offer will include multiple elements and conditions, like:

  • an initial interest rate, ie. lower for the first year,
  • an origination fee or none,
  • obligatory life insurance,
  • obligatory insurance of a low down payment, until you’ve paid a certain percentage of the principal,
  • cross-sell products, like home insurance, credit card, personal account—resigning from any of which will raise the interest rate,

and so on. Banks will be very creative with these, ie. offer a lower interest rate but higher origination fee.

Which offer is the best one then? That depends. Some ways to judge might be:

  • lowest total cost, including all fees, interest etc.—if you just want to pay the least possible.
  • lowest average monthly payment—if you want to keep your monthly expenses low,
  • lowest required down payment—if you want to spend less cash upfront.

Banks will often not provide you with all of the above information. You’ll have to pop our your favorite spreadsheet program and do some serious calculations. There are ready, useful functions for that, like Google’s PMT, PPMT and IPMT. You have to understand the concepts, though, and know how to do the calculations—what to include, add, divide, subtract etc. If math’s “not your thing”, too bad.

So much for the mortage. Think of all the other financial decisions you’ll be making. Say, signing a mobile phone contract. Is it cheaper to buy the phone separately and just pay for the calls, or have the phone subsidized by the operator? Different operators will offer different call times, messages and data in the plan. How much do you need? Which one is cheapest?

None of the above is higher mathematics. No calculus nor set theory is required. But it is mathematics, often combined with financial or other kinds of savvy, and without it you’ll be vulnerable to abuse by profit-driven salespeople. Mathematics isn’t optional. It’s the stuff of life—social interactions we handle on a daily basis.

I make software. And other things. Mostly in Warsaw, Poland, from wherever there’s an Internet connection, power outlet and fresh coffee. I love to learn and break new ground. You should follow me at @mpaluchowski.

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