April is National Financial Literacy Month. How Financially Literate are You?
, by Rob Kaufman
National Financial Literacy Month was introduced in an effort to highlight the importance of financial literacy and help teach Americans how to establish and maintain healthy financial habits. It's a great way for people to begin their path to financial wellness and create successful strategies to enhance their overall financial position.
How Financially Literate is America?
That's a loaded question. And it's a question that won't be answered in this article because any answer could be unfair to both the financially literate and the not-so-financially-literate. What is an important point to raise is the following: according to a CNBC article, the majority of Americans feel good about their financial health. However, these feelings don't appear to be on par with their financial literacy.
The results of a recent financial literacy quiz conducted by Financial Engines had only 6% of respondents passing. What does this mean? Well, it could mean that people might feel as though they're making smart financial choices, but in reality, they could be making some unintentional - and costly - mistakes.
The 4 Hardest Questions
Out of the 11 questions on the Financial Engines literacy quiz, there were 4 questions which were most often answered incorrectly. Take a look and see if you can get them right.
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)?
We'll leave some space here so you won't see the answer yet. Know, however, that only 6.9%of respondents correctly guessed the answer.
The correct answer is E. $266,000.
If you purchase a bond and interest rates rise, what will happen to the price of the bond?
B. Stay the same
Only 19.9% of respondents guess correctly.
Since bond prices and interest rates have an inverse relationship, when interest rates rise, bond prices drop and vice versa. So the correct answer is C: Fall
A typical 65-year-old man can expect to live, on average, for how many more years?
A. About 10 more years
B. About 15 more years
C. About 20 more years
D. About 25 more years
E. About 30 more years
Only 28% of respondents correctly guessed the answer to this one.
According to the Social Security Administration, men can expect to live to about 84 years old. The correct answer is C: About 20 more years.
What is the average annual rate of inflation for college tuition around the country?
A. 2 percent
B. 5 percent
C. 8 percent
D. 11 percent
Only 28.4% of respondents got this one right. The correct answer is C: 8 percent.
So... how did you do? Remember, that's only 4 (the toughest 4) questions out of 11. If you want to take the entire quiz, sit back, take a few breaths and focus. If you're unhappy with your results, take advantage of all the ways to learn about finances during National Financial Literacy Month. Knowledge is power... especially when it comes to money!
MyFICO forums are one of the best places to learn about finances - the "dos, the don'ts and the should I's?". Check it out anytime, day or night. Also, review our Financial Literacy Blog Series from last year.