I listen to a morning radio show sometimes and yesterday I was boggled to hear that 66% of adults over the age of 50 couldn't answer all three questions correctly: This is a financial literacy survey developed by economists at Dartmouth and Wharton... give it a try:
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: More than $102, exactly $102, or less than $102?
2. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, would you be able to buy more than, exactly the same as, or less than today with the money in the account?
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."
Per 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: More than $102, exactly $102, or less than $102?
2. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, would you be able to buy more than, exactly the same as, or less than today with the money in the account?
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."
Per the study:
"Results from this survey module reveal an alarmingly low level of financial
literacy among older individuals in the United States. The sample covers respondents
who are 50 or older, with the average age being 65. Only 50 percent of respondents in the
sample were able to correctly answer the first two questions, and only one-third of
respondents were able to answer all three questions correctly. The question that was most difficult for respondents to answer was the one about risk diversification; more than one third of respondents reported they did not know the answer.7 This is not only an
important finding but it also allows researchers to differentiate among different levels of
financial sophistication even when using a limited number of questions to measure
financial literacy."
Okay, so the answers:
1) More than
2) Less than
3) False
If you're 18 years old, or older and didn't get them all right I STRONGLY suggest you take, at the least, a rudimentary finance class!
Here is a link to the PDF: http://www.dartmouth.edu/~alusardi/Papers/Literacy_Tool.pdf
literacy among older individuals in the United States. The sample covers respondents
who are 50 or older, with the average age being 65. Only 50 percent of respondents in the
sample were able to correctly answer the first two questions, and only one-third of
respondents were able to answer all three questions correctly. The question that was most difficult for respondents to answer was the one about risk diversification; more than one third of respondents reported they did not know the answer.7 This is not only an
important finding but it also allows researchers to differentiate among different levels of
financial sophistication even when using a limited number of questions to measure
financial literacy."
Okay, so the answers:
1) More than
2) Less than
3) False
If you're 18 years old, or older and didn't get them all right I STRONGLY suggest you take, at the least, a rudimentary finance class!
Here is a link to the PDF: http://www.dartmouth.edu/~alusardi/Papers/Literacy_Tool.pdf
