Financial Literacy Test

I recently was watching a Vox video on YouTube and it discussed a three question quiz on Financial Literacy. https://www.youtube.com/watch?v=0uvurQcj0fs

The Financial Literacy Test

Understanding Of Interest Rate

Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much would you have in the account if you left the money to grow?

A. More than $100 B. Exactly $102 C. Less than $102 D. Don't know

Understanding Of Inflation

Imagine the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, would you be able to buy:

A. More than Today B. Exactly the same as Today C. Less than Today D. Don't know

Understanding Risk Diversification

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. Don't Know

Answer key below - Test your knowledge by taking the test and see how Financial Literate you are

The quiz just covers basic principles of interest rate, inflation and risk diversification but they are great gateway topics to see if someone is familiar with financial terms and concepts. Although it is a simple quiz, if there is any question on it that you struggle with, it is a good indication that more education and learning is required. 

Many of these financial topics are not covered in school so individuals can go years without being exposed to such words or phrases. As the saying goes, you don’t know what you don’t know.  

Financial literacy should be a life skill that is learned like riding a bike. There are books, blogs, videos and classes that you can take to grow your knowledge and the sooner you learn the better it will be for your futureself. Fear of finances is no way to live your life. Unlike riding a bike where some people literally never try it, you cannot do the same with money. Like it or not, the world runs on money and learning how it works will only benefit you helping you achieve your desired lifestyle.

Answer Key:

Interest Rate: A

Inflation: C

Risk Diversification: B

If you found this helpful and would like help budgeting or investing please email me at TaylorMckeeCoaching@gmail.com