Can You Correctly Answer These Three Financial Questions?
Survey Says Probably Not
During April, it’s National Financial Literacy Month and across the country, numerous efforts take place to increase the awareness. Regardless of your age or investment experience, studies show the earlier you begin learning these skills, the better.
Now that we’ve flipped the calendar over to May, it doesn’t mean our quest to expand our financial literacy should end; it’s an ongoing process and one topic that will challenge many of us.
As a reminder, The Atlantic recently showed that many of us could still use some help in this area, and it’s truely a worldwide concern. By posing these three questions to people across the globe in a study by two economists, Annamaria Lusardi and Olivia Mitchell, an interesting picture had been painted.
Take a look. Can you correctly answer these money questions from the study?
1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow?
A) more than $102;
B) exactly $102;
C) less than $102;
D) do not know; refuse to answer.
2. Imagine that the interest rate on your savings account is 1 percent per year and inflation is 2 percent per year. After one year, would you be able to buy
A) more than,
B) the same as, or
C) less than today with the money in this account?
D) do not know; refuse to answer.
3. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”
C) do not know; refuse to answer.
Are you ready for the answers?
Here they are: 1 (A); 2 (C); and 3 (B).
Don’t feel bad if you didn’t answer all of these correctly. You weren’t alone. In fact, 70 percent of Americans couldn’t accurately answer all three of these questions. It was higher with the Russian’s scoring 96 percent surveyed unable to answer them correctly.
So who did well?
German respondents with their highest percentage of 53 for correctly answering all three and followed by the Swiss at 50 percent.
So in other words, about 50 percent of the population from these countries couldn’t correctly answer the questions, which leaves us to believe there’s room to improve financial literacy skills across the globe.
From the countries with robust economies, the numbers are pretty disappointing as respondents couldn’t answer the three questions correctly: Swedes (79 percent), Italians (75 percent), Japanese (73 percent) and the French (69 percent).
You could say knowledge is power, and this appears to be lacking. As more retail investors enter the markets, there are an increasing number of financial products launching and therefore opportunities to make some bad decisions. It’s important these diminished financial skills become addressed.
Financial literacy should be at the front of the line when it comes to the curriculum as an essential life skill. In case the above numbers weren’t incentive enough, look at these other findings.
- Women, the poor, and the elderly have the lowest financial literacy levels.
- Regardless of their education and age, men have a greater comprehension of financial literacy.
- Women are more open about their weaknesses as more significant number responded “don’t know” than men worldwide. Could this mean women will be more likely to be proactive about financial literacy? We hope so.
So now are you ready to improve your financial literacy skills?