Making Sense Of Huge Numbers

Making-Sense-Of-Huge-NumbersQuestion: What is the value of the stake you own in RBS?

Answer: Approximately £375.00

In 2008, the British government spent approximately £45 billion of taxpaper’s money to effectively “buy” the Royal Bank of Scotland.  When that huge amount of money is apportioned between the 60 million people who live in the UK we find that the cost to each of us was £750.00.

At the time of the “bail-out” of RBS, the government considered it was a necessary move in order to avoid a catastrophic meltdown of the banking institution.  That may well be the case but as an investment it has really tanked because the value of RBS is currently estimated to be half what the government paid for it.

We all get accustomed to hearing huge figures discussed on the TV and on the Internet with relevance to government spending and company profits. I wonder how many people ever try to relate those enormous figures to their own particular circumstances.  The problem is that there are just too many noughts involved and the figures are just too complicated.

It’s true that if you try to work out the figures EXACTLY then you need a good head for numbers and a calculator that can cope with a huge string of noughts.  However, here is a trick that will enable your children to start to put some meaning to £1 billion.

There are approximately 64 million people in the UK but for the purpose of this exercise I’m going to ask you to “assume” that there is just a few more than that – say 66.6 million.  Your children will probably have learned at school that to test if a mathematical statistic makes sense then it is a good idea to make some sweeping ESTIMATES and my 66.6 million people sits well with that idea.

A billion is one thousand million.  If we now divide my figure of 66.6 million into 1,000 million we find that it is about 15.  This mathematical estimation leads us to conclude the following:

£1 billion means £15 for each man, woman and child in the UK.  It’s good to remember that and always apply it when we hear huge figures.

Let’s give it a try….

HSBC (Europe’s largest bank) reported a drop in profits to £14.4 billion.  The “drop in profits” sounds bad but it still means that they made a profit equivalent to about £210 for each of us (15 x 14 in round terms).

In contrast the TOTAL INCOME of Save the Children International (one of our largest charities) is about half a billion i.e. an average contribution of £7.50 for each of us.(15 x .5)

Now let’s look at the relationship of the two sets of figures above.  £210.00 that HSBC makes PROFIT out of each of us and £7.50 that each of us give to Save the Children.  In other words, for each £1 that Save The Children have to spend, HSBC makes 30 times that amount of profit.

How your children use those figures to make judgements about the world at large is up to them but it must be the right thing to do to give them a basic understanding of gigantic figures so that they can come to their own sensible, meaningful conclusions.

Do you have any questions about education? If so, you’ll find EQ’s Knowledge Bank very useful. We have scores of articles, each one aimed at answering a specific question asked by parents. As well as loads of info on schooling, you’ll also find plenty of advice and tips on raising happy and safe children. It’s the go to place for all your education or parenting queries.

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