5 Question Financial Literacy Quiz

[arebelspy]

http://www.usfinancialcapability.org/quiz.php

National average is 2.88/5 = 57.6%, an F!

According to FINRA, only about 14 percent of Americans surveyed in FINRA’s National Financial Capability Study (25,000 adults in 2012 and 2009) got all five questions right.

Only 14% got all of them!  WTF?!

The state of our financial education is sad.

(And yes, I got 5/5, and I expect most here to, it's not too hard.  Maybe you'll miss one due to misreading it?  My wife got 4 - she missed the bond one.  Still much better than average.)

Hat tip to Lifehacker for the link.

[Mr. Frugalwoods]

Woof.  That's depressing.  None of these are even tricky!  I even overthought the first one, already calculating yearly compounding interest.  The answer options were significantly less complicated :-)

What's the solution?  At the very least high school should include some basic financial education.  Not sure if it needs to be a whole semester, but kids should have a base of knowledge.

For adults, I honestly don't know.  Financial Public Service Announcements?  "This is your bank account on debt"  **cracks egg**

[matchewed]

Yep took that earlier today. 5/5 then looked at statistics for my state thinking that it'd be higher than average... was wrong.

[SwordGuy]

Since most people don't invest, I wouldn't expect them to understand bond prices.   

But the rest of the questions were dirt simple and everyone should know the answers.

[SwordGuy]

Um.. Just to be fully accurate, the poll is scientifically flawed.

If you don't actually know the answer to a question, the answer "Don't Know" is technically correct... :)

[The Money Monk]

Um.. Just to be fully accurate, the poll is scientifically flawed.

If you don't actually know the answer to a question, the answer "Don't Know" is technically correct... :)

If the idea is to find out if people actually know or not, then it makes sense. If they removed that option people who didn't know would guess, and accidentally get it right at least 33% of the time even though they didn't really know the answer, which would skew the results upward.

[Cheddar Stacker]

Um.. Just to be fully accurate, the poll is scientifically flawed.

If you don't actually know the answer to a question, the answer "Don't Know" is technically correct... :)

The most shocking thing to me was that 1.26 out of 5 questions were answered I Don't Know.

Idiocracy. Sad.

[A_P_]

I saw this this morning as well. Utterly depressing.

[Luck12]

I got 5/5, but might not have if had not majored in econ and/or didn't work in a financial field - would not expect avg person to get the bond price one, but the rest are really easy no matter your background. 

[Primm]

I got 5/5 and I'm a nurse who doesn't work in the financial field - the bond one is easy if you've done any financial self-education. You don't need a major in economics to know that.

[arebelspy]

I got 5/5, but might not have if had not majored in econ and/or didn't work in a financial field - would not expect avg person to get the bond price one, but the rest are really easy no matter your background.

Right, so like I said, my wife missed the bond one, and then I gave her the 20-second explanation, and I bet she grasps it now more than most people who got that question right.

But that aside, if you miss that you should have 4 right.

The average was 2.88!  In other words, assume someone missed the bond one AND one more (I don't know which one, they're all quite simple), and they'd still actually do better than the average.

Oof.

[taekvideo]

Yeah 4 of those were completely trivial.
The bond one I can understand people missing... if they haven't learned anything about investing.

[deborah]

I got 5/5, but might not have if had not majored in econ and/or didn't work in a financial field - would not expect avg person to get the bond price one, but the rest are really easy no matter your background.

Right, so like I said, my wife missed the bond one, and then I gave her the 20-second explanation, and I bet she grasps it now more than most people who got that question right.

But that aside, if you miss that you should have 4 right.

The average was 2.88!  In other words, assume someone missed the bond one AND one more (I don't know which one, they're all quite simple), and they'd still actually do better than the average.

Oof.

I have included an attachment of the table from the report http://www.usfinancialcapability.org/downloads/NFCS_2012_Report_Natl_Findings.pdf

They note that 73% of people think they are quite financially literate, up from 67% in 2009, although the scores are lower!

[RetiredAt63]

5/5 here, they were not hard.

My math background is science stats, not finance calculations - but when I needed to figure out how much interest something had accrued, I just found an internet calculation site.  It was not exactly difficult.  When I showed the numbers to the person who needed to see them (a well-educated intelligent professional) he was impressed.  So if he was impressed at my financial calculations, what does that say for the abilities of the "average" person?

[Luck12]

As I suspected, the bond question was by far the toughest question at only 28% answering correctly compared to the others at close to or >50%.  I think one can invest well without knowing anything about the fundamentals of bonds and their prices (really, can just know to invest x % in bond index and re-balance and re-allocate appropriately).   Can't say that as much about the other questions. 

[No Name Guy]

They note that 73% of people think they are quite financially literate, up from 67% in 2009, although the scores are lower!

http://en.wikipedia.org/wiki/Dunning%E2%80%93Kruger_effect

Dunning and Kruger noted:

Across four studies, the authors found that participants scoring in the bottom quartile on tests of humor, grammar, and logic grossly overestimated their test performance and ability. Although test scores put them in the 12th percentile, they estimated themselves to be in the 62nd.[2]

Meanwhile, people with true ability tended to underestimate their relative competence. Roughly, participants who found tasks to be relatively easy erroneously assumed, to some extent, that the tasks must also be easy for others.

Dunning-Kruger in action.

[Lutra]

A couple are simple math, so its scary that so many do so poorly.  The one I got wrong was the one with bonds, since I really know nothing about them.  I figured there was no relationship.

[Malaysia41]

Weird. The website doesn't seem to be available in Malaysia.  Huh.  Wonder if it is only available in US (out of shame?). 

[Primm]

Weird. The website doesn't seem to be available in Malaysia.  Huh.  Wonder if it is only available in US (out of shame?).

Nope, I did it here in Australia.

[SpeedReader]

Back in the Dark Ages when I was in grade school, it was part of our regular math curriculum to learn how to balance a checkbook, what interest was, etc.  We even did a section on the stock market, using play money to buy and sell stocks and following their performance in the newspaper. 

I suppose no one does that anymore?

[jstash]

I got 5/5. Surprised Utah is the most financially literate state (one would hope New York, right?).

[lackofstache]

yay, 5/5.

[The Guru]

5 of 5 . Since the first 2 were simple basic math- no financial knowledge necessary- I retook it and just answered the last 3 with "A". Got 3 of 5 which is better than average. Scary.

[Workinghard]

I was afraid to take it since everyone was posting 5/5.  I was expecting it to be more difficult, but even I got it.

[GuitarStv]

57% is an F?

[Jack]

I got 5/5. Surprised Utah is the most financially literate state (one would hope New York, right?).

I think Mormons actually teach financial literacy as part of their religious beliefs.

[arebelspy]

57% is an F?

On most grading scales, yes.

90-100 A
80-89 B
70-79 C
60-69 D
0-59 F

[superone!]

I was afraid to take it since everyone was posting 5/5.  I was expecting it to be more difficult, but even I got it.

Me too! I have virtually no finance background, but I pay attention to things. These were super easy questions. Very disturbing that on average people got nearly half of them wrong...

[Hedge_87]

So I screwed up the one about the mortgage.  Only because I miss read it. We had some wine with our dinner lol.

[Wimsey1923]

Wouldn't people who consider themselves financially literate be more likely to take such a test? What would the results be if "everybody" took the test?

[soccerluvof4]

Shew...after reading most everyones responses i took the test then under pressure. 5/5  Well at least I know something. 

[Phil_Moore]

Woohoo 5/5.

If you'd asked me three years ago I would have got the bond one wrong though.

[warfreak2]

The bond one is definitely the hardest, but still easy if you know what's going on. When you buy a bond, what you are really doing is buying a fixed amount of money in the future. If the interest rate is 4% and you buy a 1 year bond for $100, you should get $104 next year; if it's 6% then you should get $106 next year. Conversely, if the interest rate is 4% then $100 next year will cost you ~$96 now, and if it's 6% it'll cost you ~$94 now. (Actually, $96.15 and $94.34, because interest is multiplicative rather than additive).

[GuitarStv]

57% is an F?

On most grading scales, yes.

90-100 A
80-89 B
70-79 C
60-69 D
0-59 F

Huh.  I think I've always had a percentage grade in my classes, but I'd always though that under 50 was an F.

[brandino29]

Woof.  That's depressing.  None of these are even tricky!  I even overthought the first one, already calculating yearly compounding interest.  The answer options were significantly less complicated :-)

What's the solution?  At the very least high school should include some basic financial education.  Not sure if it needs to be a whole semester, but kids should have a base of knowledge.

For adults, I honestly don't know.  Financial Public Service Announcements?  "This is your bank account on debt"  **cracks egg**

I think this is the real issue.  Our education system does an awful job of educating our future on basic personal finance.  I remember having to learn how to balance a checkbook in 8th grade home economics but that was the full extent.  Of course parents should be doing a better job on the whole but obviously parents don't know it either. 

I definitely think that "Basic Finance" should be a required course for all high school students. 

[Cheddar Stacker]

57% is an F?

On most grading scales, yes.

90-100 A
80-89 B
70-79 C
60-69 D
0-59 F

Huh.  I think I've always had a percentage grade in my classes, but I'd always though that under 50 was an F.

Maybe that's true up in Canada eh? Rebs grading scale is what I've known since 9th grade. Prior to that at a private elementary school they used a slightly harder scale, so < 70% was an F.

[arebelspy]

57% is an F?

On most grading scales, yes.

90-100 A
80-89 B
70-79 C
60-69 D
0-59 F

Huh.  I think I've always had a percentage grade in my classes, but I'd always though that under 50 was an F.

So what did you think the A/B/C/D/F breakdowns were?

[Grant Q]

I really enjoyed looking at the huge state-by-state variances...my adopted state of Texas had one of the lowest scores at 2.73.  Not too surprising since Texas has to be the consumer capitol of the U.S., if not the world. But my home state of Montana, where most people kill their own dinner, had one of the highest scores at 3.19!

[GuitarStv]

57% is an F?

On most grading scales, yes.

90-100 A
80-89 B
70-79 C
60-69 D
0-59 F

Huh.  I think I've always had a percentage grade in my classes, but I'd always though that under 50 was an F.

So what did you think the A/B/C/D/F breakdowns were?

90+ = A+
80+ = A   
70+ = B
60+ = C
50+ = D
under 50 = F

An F is always a failure grade, and typically if you've made over 50% it's considered a pass.  At least that's what I thought the convention was.  :P

[arebelspy]

Wow, I'd love to be a student on that grading scale!  90 an A+?  70 a B?

AFAIK though, the scale I posted is much more common (definitely here in the states).

[Iron Mike Sharpe]

I think that comes from the days when the Canadian dollar wasn't as strong as the US dollar; I guess the same was true for grades.

; )

[Philociraptor]

Back in the Dark Ages when I was in grade school, it was part of our regular math curriculum to learn how to balance a checkbook, what interest was, etc.  We even did a section on the stock market, using play money to buy and sell stocks and following their performance in the newspaper. 

I suppose no one does that anymore?

What's a newspaper?

=)

[geekette]

Wow - when I was in school, a 93 and up was an A, 85-92 was a B. 

I don't recall the others - didn't apply to me ;-).

[Emilyngh]

Back in the Dark Ages when I was in grade school, it was part of our regular math curriculum to learn how to balance a checkbook, what interest was, etc.  We even did a section on the stock market, using play money to buy and sell stocks and following their performance in the newspaper. 

I suppose no one does that anymore?

What's a newspaper?

=)

What's a checkbook?

[imustachemystash]

I got 5/5 and I credit it all to you on the forum.  I've learned a lot about finance from hanging around this site over the past year and a half.  Yesterday I read someone explain about bonds on another thread so I got it right!

[Cheddar Stacker]

Back in the Dark Ages when I was in grade school, it was part of our regular math curriculum to learn how to balance a checkbook, what interest was, etc.  We even did a section on the stock market, using play money to buy and sell stocks and following their performance in the newspaper. 

I suppose no one does that anymore?

What's a newspaper?

=)

What's a checkbook?

If it makes you feel better SpeedReader I took a class in college called "investing". The internet was a newborn baby way back then, but we did the same thing. We were all given $100,000 in virtual funds, we invested them in a virtual stock market, and part of the grade was based on following your investment strategy. Of course we all just wanted to day trade, and some of us did quite well. Yahoo doubled then split many times over during that semester, so some of us kicked some ass. I don't think that's what the teacher was really going for, but it was fun.

[gimp]

5/5, dunno whether to laugh or cry. Bonds gave me pause, but I remembered... I also remembered this in 2008:

- Source A: Unemployment increases!
- Source B: Treasurys stronger!

I love how the same situation can be made to look terrible or great to the uninformed, without lying, without even a hint of a lie, just by telling the right truth to the wrong people.

[arebelspy]

I got 5/5 and I credit it all to you on the forum.  I've learned a lot about finance from hanging around this site over the past year and a half.  Yesterday I read someone explain about bonds on another thread so I got it right!

Give yourself some credit, too.  Taking charge of your finances, spending time learning about these things, and becoming financially literate enough to be in the 14% of Americans who can get 5/5 is no simple thing, so well done!  :)

[Emilyngh]

After taking it myself and getting a 5, I just gave the test to DH.   He really has no interest in finance, had a negative NW and no investments before meeting me, and his eyes glaze over after about 10 min of me trying to talk to him about our budget, he's not a "math person," etc, and HE got a perfect 5/5 with no hints/coaching from me.   

I thought he'd maybe mess up the bond one, but he whizzed through the whole thing without pause.   I'm impressed! (And saddened then about how the hell the average could be as it is).

[Stagleton]

strange, I answered "I don't know" and got the question wrong. I think this test is flawed