Sunday , 23 October 2016

Do You Have An Above Average Understanding of Money? Here’s a Quiz

Do you understand money? Many couldn’t pass this simple finance quiz. Can you?Ways-to-make-money-1

Let’s see how well you do with the following questions.

1.  Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 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% per year and inflation is 2% per year. After one year, with the same amount of money, would you be able to buy

A) more?

B) exactly the same?

C) less than today…?

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.”

A) True;

B) False;

C) Do not know; refuse to answer.

The correct answers are 1-A; 2-C; and 3-B.

How did you do? Did you respond correctly to all three questions? If you did, then you belong to a surprisingly small global minority:

  • 96% of those surveyed in Russia could not answer the three questions correctly. While that might be expected of a post-communist nation, the mecca of capitalism didn’t exactly yield glowing results—
  • only 30% of Americans aced the quiz.
  • The best-performing respondents were the Germans (53%) and the Swiss (50%), but this still leaves almost half of each country’s population without a basic understanding of financial matters.
  • In countries with relatively strong economies, the numbers are sobering: 79% of Swedes, 75% of Italians, 73% of Japanese, and 69% of French could not respond correctly to all three questions.

The economists write, “Financial markets around the world have become increasingly accessible to the ‘small investor,’ as new products and financial services grow widespread. At the onset of the recent financial crisis, consumer credit and mortgage borrowing had burgeoned. People who had credit cards or sub-prime mortgages were in the historically unusual position of being able to decide how much they wanted to borrow. Alternative financial services including payday loans, pawn shops, auto title loans, tax refund loans, and rent-to-own shops have also become widespread. At the same time, changes in the pension landscape are increasingly thrusting responsibility for saving, investing, and accumulating wealth on to workers and retirees…. [Today], Baby Boomers mainly have defined contribution (DC) plans and Individual Retirement Accounts (IRAs) during their working years. This trend…is increasingly requiring people to decide how much to save and where to invest and, during retirement, to take on responsibility for careful accumulation so as not to outlive their assets while meeting their needs.”

The heightened danger of financial ignorance underlies all these transactions—and more. For a large and fast-growing number of people, personal bankruptcy is just one bad decision away.  This threat will become more critical as the global middle class continues to expand. The new-found prosperity of millions of families in the developing world could be shattered if they mismanage expenses, acquire large and expensive debts, fail to adequately protect their savings, or don’t know how to identify a tempting but catastrophically risky investment. The truth is, these problems are everywhere, and all countries stand to benefit from programs that encourage greater consumer knowledge.

Lusardi and Mitchell found that providing financial knowledge to people with low levels of formal education boosts their economic situation by an amount equivalent to 82 percent of their initial wealth, while the equivalent value for college graduates is a substantial 56 percent.

Good news, right? On the basis of these results, one might presume that demand for financial education is very strong. It is not, and that’s mostly because people are prone to overestimate how much they know about money. Asked to rank their financial knowledge on a scale of 1 (very low) to 7 (very high),

  • 70% of the Americans surveyed by Lusardi and Mitchell ranked themselves at level 4 or higher, yet only 30% of them got all three questions in the finance quiz right.
  • The same pattern was apparent in Germany and the Netherlands.

The research also found that:

  • women, the poor, and the elderly are the groups with the lowest levels of financial literacy.
  • Ironically for the elderly, confidence in one’s money-managing prowess seems to grow with age, widening the gap between perceived and actual knowledge.
  • Men seem to better grasp the subject than women, independent of age and education.
  • Women are more aware of their shortcomings…[with a] greater numbers of women responding that they “don’t know” on the financial quiz – a result that held true all over the world. The upshot is that women, more conscious of their limitations, are more likely to be interested in financial-education programs.


As financial products become more diverse, complex, and widespread, and more people join the middle class, fighting the world’s financial illiteracy will become even more of a priority. Practical and accessible education programs should be offered to the millions of people whose economic well-being would improve if they only knew more about managing their incomes and savings, however meager they may be.

Disclosure: The original article, by Moisés Naím (, was edited ([ ]) and abridged (…) by the editorial team at (Your Key to Making Money!) to provide a fast and easy read.
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One comment

  1. According to this simple quiz, I’m a financial Genius but I must admit that most people I know much more about how to spend money that how to grow money, which gives an entirely new definition to the term Green Thumb.

    Most readers of this site are content with accessing the material but since I am one of the few that post comments, I believe that most readers either don’t understand what they are reading or only look at the titles of the articles and their images and move on to something else.

    People spend vast amounts of time working as “was slaves” in order to make money then refuse to spend time making things easier for both then and their families by using the money they do have wisely.

    Here is another question for all readers to consider along with an extra credit question, I hope you will answer by leaving a comment explaining why you choose the answer you did:

    If you had 10% of your portfolio invested in physical Sliver and the value of the rest of your portfolio decreased by 50% due to a revaluation of the US$ relative to Silver what percentage of your original portfolio’s value would you have?

    A. Less than half the amount

    B. Half the original amount

    C. More than half the amount

    ===> Two Extra Credit Questions:

    1. What percentage of Silver would you have to have in your portfolio (as described in the above question) would you have to have to start with in your portfolio in order to end up with the same total value in your portfolio after the decrease in your portfolios assets except for Silver?

    A. 25% Silver

    B. 33% Silver

    C 50% Silver

    2. What percentage of all physical PM do you now have in your portfolio and why do you have that amount (no actual amounts need to be listed, percentages only please?

    Answer: _______________________________________________________________________