Correction: This story has been updated to reflect that Michelle Singletary keeps a car for 10 years on average, not five years.

Whenever I urge people to stop being serial auto-loan consumers, I get bewildered looks.

I mean it. Pay cash for your car and make the math work in your favor.

I get that you might not be able to get off the car-loan circuit right away. But once you pay off one car loan, continue making the payments — but to yourself.

The average length of vehicle ownership for a new car has increased to nearly six years, according to R.L. Polk & Co., which owns the used-car history provider Carfax. If you hold onto your car for four or five or 10 years (the average time I keep a car), then you can pay cash the next time you buy.

“You just freed me,” said one woman at a recent seminar I gave on personal finance. “I just thought you always have a car note, so I would roll from one car loan to another.”

It’s not her fault.

This is just one example of the things people don’t understand about their finances. A new report by the Investor Education Foundation of the Financial Industry Regulatory Authority (FINRA) found that a majority of American adults (61 percent) couldn’t correctly answer more than three of five fundamental financial literacy questions. That’s an increase from 58 percent in 2009.

FINRA and other organizations produce these surveys not to make us feel ignorant. What they tell us is that consumers these days have to know so much more than did generations of the past. The better these organizations understand where you are lacking in competency, the better they can tailor financial education initiatives.

“Managing one’s finances is a complex set of challenges in the best of times, requiring a combination of skills, judgment and resources,” FINRA says in its report. “In today’s volatile economic environment, the challenges are especially acute and the downside risks are great. Individuals and families must grapple with a bewildering variety of financial decisions, ranging from choosing a bank and managing various kinds of debt to planning for retirement and purchasing insurance. Even the simplest of these decisions requires at least some basic financial knowledge and competency, while the more complicated decisions are challenging even for experts.”

In conducting the online surveys of more than 25,000 adults, FINRA focused on the following four areas: making ends meet, planning ahead, managing financial products, and financial knowledge and decision-making.

In the 2012 survey, 40 percent of respondents said they didn’t have trouble covering their monthly expenses, up from 36 percent in 2009. That’s good. But people still aren’t planning for when things go wrong financially. Fifty-six percent of Americans said they didn’t have an emergency fund to cover three months of expenses. Only 49 percent of credit-card users said they pay their credit card balances in full. Nearly a third said they use costly financial products such as payday loans. (Such loans are debt a borrower promises to repay out of his or her next paycheck, typically in two weeks and typically at astronomical interest rates.)

So, what do you know?

Here’s one question from the financial capability quiz: “Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?”

For some of you the answer is easy. But the reality is that most people don’t really understand how inflation works. They may know it’s important but are fuzzy on the reason it’s so important.

As FINRA explains in the answer, “inflation is the rate at which the price of goods and services rises. If the annual inflation rate is 2 percent but the savings account only earns 1 percent, the cost of goods and services has outpaced the buying power of the money in the savings account that year. Put another way, your buying power has not kept up with inflation.”

Despite the low levels of financial literacy, many people think they know more than they do, and end up paying the price. When asked, 76 percent rated themselves as being good at day-to-day financial matters such as managing their credit cards. But among the percentage of those who gave themselves the highest marks, one-third were handling their finances in ways that increased their costs — making minimum payments on their credit cards, incurring late payment fees or taking out cash advances.

Take the quiz yourself. The survey findings and quiz are available at

If you don’t score well, become better informed, because what you don’t know can cost you big time.

Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read previous Color of Money columns, go to