Can You Pass This Financial Literacy Quiz? Most Americans Can’t
Although these questions address fundamental financial issues everyone will face, only 1 in 16 people actually know the answers. Test your retirement readiness with this quickie quiz.
Are you financially literate?
Would you describe yourself as financially literate? Take this quiz and find out. But be warned: only 6 percent of Americans passed this exam. Sadly, most Americans are never taught how to manage money or save for goals, so achieving financial security is a bigger challenge than it needs to be. Make sure you avoid the 15 mistakes that will ruin your retirement.
Why become financially literate?
“It’s important to be financially literate because your financial knowledge affects virtually every aspect of your life,” explains Marc Diana, CEO of MoneyTips.com, which helps people achieve their financial goals through tools and education. “Will my income support my family? Do I have enough money to retire? The more you know about finances, the better you can handle debt and manage your savings. A financial mistake, like buying more house than you could afford, could affect your standard of living until the day you die.” Check out these 9 key retirement planning steps you need to take.
Introducing the tough test
The quiz is from financialengines.com, which serves as a financial advisor to over nine million people across over 700 companies. Their brain-buster covers a wide range of financial literacy topics in just 11 questions. If you feel secure in your financial literacy, take a shot at three of the hardest questions. Don’t say we didn’t warn you! If you want something easier, see if you could pass this elementary school math test.
Financial literacy quiz question #1
How much will the typical married couple retiring at age 65 spend on out-of-pocket costs for health care throughout retirement (in today’s dollars)?
Financial literacy quiz answer #1
Did you guess E. $266,000? Just under 7 percent of respondents chose this correct value. If you guessed F. $330,000, don’t feel too bad: Fidelity’s annual estimate jumped to $280,000 in 2018, and their estimates don’t include long-term health care costs—a substantial financial burden if required. See how much health care costs in each state.
Financial literacy quiz question #2
If you purchase a bond and interest rates rise, what happens to the price of the bond?
A. It rises
B. It stays the same
C. It falls
Financial literacy quiz answer #2
Less than 20 percent of respondents knew that the correct answer is C. Bond prices fall when interest rates rise—it’s possible that people who get this wrong may be confusing bond yields (the return an investor receives on bonds) with bond prices. When interest rates rise, new bonds will provide a higher yield than bonds that you purchased earlier at lower interest rates. To sell your bonds that return less, you must drop the price to make them more attractive. Learn more about bonds. And if you’re financial vocabulary is limited, learn the 9 financial planning terms everyone needs to know.
Financial literacy quiz answer #3
Social Security Administration data suggests that the average man should expect to live until age 84, so 20 more years is the correct answer. Tack on an extra three years for the average female lifespan. Quiz results show that only 28 percent know how long the average man will live: If you don’t have a good sense of how long you’ll live, how can you feel confident that you won’t outlive your savings? A free Retirement Planner can help you calculate when you can retire without jeopardizing your lifestyle.
Financial literacy quiz results
So, how did you do? If you answered 2 out of 3 correctly, you passed. In addition to the above topics, the full quiz addresses financial areas like life insurance, Social Security, estate planning, and interest calculations. Find out the 13 retirement facts you need to take seriously.