To find out, answer these three questions.
1. Suppose you had €100 in a savings account and the interest rate was 2% 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
2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
A. More than today
B. Exactly the same
C. Less than today
3. Please tell me whether this statement is true or false: “Buying a single company’s stock usually provides a safer return than investing in a mutual fund.”
The correct answers are below.
Researchers studying financial literacy have broken down their findings by education, gender, age and nationality. Among the findings:
- In a survey of people over the age of 50, only half could answer the first two questions correctly. Only one-third got all three right.
- 44% of people with a college degree answered all three questions correctly. The figure was 31% for people with some college and 64% for those with postgraduate education.
Even well-educated people are not necessarily savvy about money,
38% of men got all three answers correct compared to 23% for women. Men are more confident about their financial knowledge than they should be. Even when they are wrong, they reported being ‘very confident’ about their answers. While women generally answer fewer financial knowledge questions correctly, on average, they are more likely to admit when they do not know the answers. This suggests financial education may be more welcomed by women, should the opportunity arise.
The Paris-based Organisation for Economic Co-operation and Development [OECD] gave a more-extensive test of financial literacy to 15 year olds in 18 countries.
The top performing children were from China followed by Australia, France and Poland.
The correct answers are:
- – A; 2. – C; 3. – False.