Blogs | July 2, 2012

How did Euro 2012 teach us about managing money better?

Ian asks: With the final whistle blown on Euro 2012 – as well as on the eZonomics Cup-o-nomics campaign – what are the main lessons from the tournament about managing money better?


Ian answers: I don’t tend to ask myself questions – or not in public, at least. But the Euro 2012 provided four clear examples of how to manage money better that were so interesting, I couldn’t help but share them.
We’ve already highlighted general principals about football and economics, such as the seven personal finance lessons from football. This column looks at actual instances that happened in the Euro 2012 tournament in Poland and the Ukraine, won by Spain last night.

Luck is like risk
Luck played a key part in several matches in Euro 2012. Penalty shoot-outs and near misses are examples that we saw time and time again. One instance that stands out is the shot at goal by Ukraine in the game against England that many claim was actually a disallowed goal. England progressed to the final eight.
Luck in sport is like risk in managing money. Even the best made financial plans can be disrupted. Being aware that bad luck can happen shows the importance of having an emergency fund to provide a defence against unexpected set backs. It also highlights the role insurance can play in protecting against catastrophic events.

Home bias can disappoint
When asked in an ING poll before the tournament, 90% of about 1,000 Spaniards thought their national team would win the Euro 2012. Fair enough. But 60% of Germans polled also thought their team would bring home the cup and 46% of Italians thought their home team would.
This is a problem because, of course, there can only be one winner.
This “home bias” tends to be harmless good fun in sports but when managing investments it can cause problems. Spreading investments, such as those held in retirement savings accounts, across several countries is widely considered to be one way to spread investment risk. Backing “your team” too far might end up being costly.

Order matters
Cast your mind back to the semi-final between Portugal and Spain. Portuguese striker Cristiano Ronaldo was lined up to take the fifth kick in the penalty shootout. But the match was decided when Spain won 4-2 on penalties meaning Ronaldo did not get a chance to kick.
If Ronaldo had taken an earlier shot, would the result be different? No one can say. However, sometimes the order in which things happen can affect results.
Economist Chris Dillow blogged for eZonomics about how order can influence decisions ranging from how attractive we think people are to whether we are going to invest in certain shares.

Finally, winning isn’t everything
Although their team was beaten on the pitch, Irish supporters did not leave Euro 2012 empty-handed. Governing body UEFA will reportedly make a special award to the Football Association of Ireland to recognise the great behaviour and contribution of Irish fans to the tournament. It tallies with the results of an ING poll that found Irish football fans were prepared to sacrifice more cash than any of the 16 Euro 2012 finalists to see their team win. Although Ireland didn’t claim the cup, winning isn’t everything – and the poll found national pride and happiness also get a boost from sport.

InvestingSportMoney

Ian Bright
Ian Bright

Senior economist at ING
.(JavaScript must be enabled to view this email address)

43 blogs

If you have a question for Ian, ask him here.

Have your say

Should schools teach financial literacy?