Obviously as an individual, but probably more importantly as a planner, teacher and arbitrator, I have had the opportunity to view thousands of situations where people have invested for all sorts of reasons. Unfortunately, and probably quite clear from my other writings, I have found many of these individuals to be limited in their abilities to comprehend what they are doing- yet indicating that they had a firm grasp of the situation. When they did- and continue to do- what I thought were clearly illogical and ridiculous activities, I would ask myself, "don't they understand, can't they see???" Well, the answer is, alas, NO!

Unfortunately for them- they actually THINK they possess the skills to logically and competently understand what they are doing- only to be deceived by this ineptness. And much of this was identified by the 1992 National Adult Literacy Survey. They did a most comprehensive study that addressed five levels of literacy pursuant to its definition, "an individual's ability to read, write, and speak in English and compute and solve problems at levels of proficiency necessary to function on the job and in society, to achieve one's goals, and to develop one's knowledge and potential". The National Adult Literacy Survey measured competency against three levels- prose literacy, document literacy and quantitative literacy.

Prose literacy- those with competency can locate information, find all information, integrate information from various parts of a passage of a text, and write new information related to the text.

Those measured in the survey were graded against a score of 500.

Level 1 participants could consistently perform just level 1 requirements, but none of level 2.

Level 2 could perform both 1 and 2, but not consistently do number 3. And so on.

The scores:

Level 1 scored from 0- 225 and represented 21% of Americans or about 40 million of the total 191 million U.S. population.

Level 2 scored from 225 to 275 and represented 27% or 52 million Americans. At this point you can see that effectively 50% of all Americans performed at the lowest two levels of literacy.

Level 3 scored from 275 to 375 and 32% or 61 million Americans performed at this level.

Level 4 scored 325 to 375 and covered just 17% of the U.S. population or 33 million

Level 5 scored 375 to 500 and covered a minuscule 3% of the population or 6 million.

Document literacy means that people can locate information, repeat the search as many times as needed to find all the information, integrate information from various parts of the document, and write new information as requested in appropriate places in a document.

Level - 23%

Level 2- 28%

Level 3- 31%

Level 4- 15%

Level 5- 3%

Quantitative literacy means that people can locate quantities, repeat the search as many times as needed to find all the numbers, integrate information from various parts of a document, infer the necessary arithmetic operation, and perform arithmetic operations. The scores were quite similar

Level 1- 22%

Level 2- 25%

Level 3- 31%

Level 4- 17%

Level 5- 4%

The survey by the U.S. Department of Education's National Center for Education Statistics estimated that 21% to 23% of the adult population over the age of 16 had only rudimentary reading and writing skills.

The study noted that while 25% to 28% of respondents were proficient in level 1, "their repertoire was still quite limited". Individuals in levels 1 and 2 "were apt to experience considerable difficulty in performing tasks that required them to integrate or synthesize information from complex or lengthy texts or to perform quantitative tasks that involved two or more sequential operations and in which the individual has to set up the problem. Surprisingly, the approximately 90 million people did not necessarily see themselves "at risk". 93% to 97% of respondents in level 2 described themselves as being able to read or write English "well" or "very well".

The summary noted that in our technological society "growing numbers of individuals are expected to be able to attend to multiple features of information in lengthy and sometimes complex displays, to compare and contrast information, to integrate information from various parts of a text or document, to generate ideas and information based on what they read, and to apply arithmetic operations sequentially to solve a problem."

"The results of this and other surveys, however, indicate that many adults do not demonstrate these levels of proficiency. Further, the continuing process of demographic, social and economic change within this country could lead to a more divided society along both racial and socioeconomic lines."

In any case, there is the substantiation for the fact that at least 80% of the populace simply lack the competency to understand the investments placed before them. What you say? After all, only 50% were in the lower levels of 1 and 2. Certainly those in level 3 could understand what the risk reward limitations were of an investment. Possibly true, BUT ONLY IF THEY MADE THE EFFORT. Hardly anyone I have ever know has bothered to read a prospectus. Invariably they simply trust the "adviser" to tell them what to do.

And what about the elderly? Do they possess the same statistical level or might it be lower? Well, here are some comments about their capabilities.

The Education Department's study revealed

So, what explains the difference between the young and old? Some may be obvious, but here are the factors as defined by the U.S. Department of Education.

The National Adult Literacy Survey did review the correlation between adults' employment and voluntary civic participation.

What about those who continue to learn?

Unfortunately, during a week, an adults spends over 15 hours watching TV and about 2.8 hours reading

The above is therefore very indicative of why so many seniors are prime for scams. They simply do not possess the skills to help themselves, but think they do.

The overall study and the subsequent commentary on the elderly clearly, at least in my mind, demonstrates a large gap in the ability of the bulk of Americans to properly comprehend what they are doing with investments. And, I submit, that those that do have the capability to comprehend their actions are NOT spending the time to do the necessary research. Lastly, the elderly- save for those that are physically and mentally incapacitated- are even more at risk. Many are not retaining their (limited) prose of quantitative skills because they do make even less efforts after retirement to stay properly informed (reading). It is therefore clear why many elderly are victims of scams. They do not possess the competency skills to protect themselves- but believe they have.

Can such competencies be increased? Absolutely! In a book by Helen Brown called Literacy in Older Adults in America, she noted the importance of literacy in order to live productive lives. "Literacy helps older persons to learn new things, read for pleasure, be informed, handle everyday tasks and take care of their needs".

The Department of Education noted that "Good literacy skills help older persons lead more productive lives and comprehend self care information..." And society benefits if seniors are perceived as productive individuals who continue to learn and contribute.

Buying investments, insurance, doing planning of all types, etc. requires an intellectual exercise that first starts with intensive reading. I do not see that emphasis in our society. The greatest gift- outside of good health- is the ability to communicate effectively and knowledgeably. That starts with READING since, if one can read, they can amass the intellectual skills to be valued citizens in our society.