Financial literacy is important, but it's unfortunately not something they teach you a lot about in school. So, how good are you when it comes to understanding finances and financial institutions? The good news is, you can take this financial literacy quiz to find out. Though fair warning: Most people don't score very well. That fact might be good or bad for your chances of beating the national average, but it probably doesn't say anything good about the country. But hey, there's still value in knowing how much you don't know; at least it gives you an idea of what holes in your knowledge might be worth filling.
Despite the fact that America is a major player in the global financial markets and the fact that financial institutions, from banks to the stock market to the Federal Reserve, have a huge impact on American life, most Americans don't have the best understanding of how these things work. Unless you take a course on economics, the closest you'll probably get is high school classes that help teach you about personal finance. But although that's important, unless your high school was very different from mine they also probably didn't cover things like mutual funds.
And you can see this lack of financial literacy education reflected in the data. Indeed, according to a recent report from the Financial Industry Regulatory Authority, our general knowledge of financial literacy has actually dropped over the past five years. When it comes to this five-question quiz, which is hosted by the FINRA Investor Education Foundation, two-thirds of Americans score a three or below. Even throwing in a bonus question, the national average is only three questions out of six. Which is... not good.
So, how well do you score? I decided to give it a try — though if you don't want to be biased based on my answers, you can take the quiz yourself first here.
1. Calculating Interest
Thank you, high school algebra, for making me actually pretty confident about this one.
2. Interest vs. Inflation
It's not how much money you have, it's how much your money is worth.
3. Understanding Bonds
I'll be honest, I have never gained a real understanding of what bonds are, so I should probably just go with that helpful "Don't Know" option; however, one of the takeaways I got from my standardized testing years is that if you aren't being docked for wrong answers, always guess something.
Mortgages — everyone's favorite thing, am I right?
5. Single Stocks vs. Mutual Funds
I am definitely not the sort of person who has the money to invest in anything, let alone stocks or mutual funds, but I do at least understand what those things are. Anything that can make people magically rich without them having to do any work is worth paying attention to.
Bonus: If You Totally Ignore Your Loans...
No matter what the answer is, I'm guessing that the real takeaway here is that this is a really bad idea.
So, How Did I Do?
Not bad as it turns out — though I'm not telling you what I got wrong. For that, you'll just have to go back and take the quiz for yourself.
More relevantly, I find it a little surprising that New York, the financial capital of America, is well below the national average for the quiz. What with Wall Street being here, you'd think we'd have a better handle on the whole thing — but then again, I guess not.
Take the quiz financial literacy quiz here.
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