​​Are You Financially Literate?

The Standard & Poor’s Ratings Services Global Financial Literacy Survey is the first and most comprehensive global gauge of financial literacy to-date.  More than 150,000 adults from 148 countries were tested on their knowledge of four basic financial concepts: risk diversification, inflation, numeracy (interest), and compound interest.  Respondents were considered financially literate if they were able to correctly answer questions about three of the four concepts.
 
Take the test below to see how financially literate you are.  After you are finished, click here to see explanations of the answers.

1.  Suppose you have some money.  Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?
a. one business or investment
b. multiple businesses or investments
c. don't know

2.  Suppose over the next 10 years the prices of the things you buy double.  If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today, or more than you can buy today?
a. less
b. the same
c. more
d. don’t know

3.  Suppose you need to borrow 100 U.S. dollars.  Which is the lower amount to pay back: 105 U.S. dollars or 100 U.S. dollars plus three percent?
a. 105 U.S. dollars
b. 100 U.S. dollars plus three percent
c. don’t know

4.  Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account.  Will the bank add more money to your account the second year than it did the first year, or will it add the same amount of money both years?
a. more
b. the same
c. don’t know

5.  Suppose you had 100 U.S. dollars in a savings account and the bank adds 10 percent per year to the account.  How much money would you have in the account after five years if you did not remove any money from the account?
a. more than 150 dollars
b. exactly 150 dollars
c. less than 150 dollars
d. don’t know

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How did you do?

If you answered most of these questions correctly, you did better than a whopping 43% of Americans and 67% of the world population.
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Some other key highlights from the study:

• Low levels of financial literacy around the world
• Numeracy and inflation are the most understood concepts
• Risk diversification is the least understood concept
• Women’s financial literacy levels are lower than men’s
• The young are a vulnerable group and an important target for financial education programs

To learn more about the study click here.