The latest progress report on how well Americans are handling their money is in. And as it turns out, many consumers are struggling to understand the basics.
The report from the FINRA Investor Education Foundation, which is done every three years, found that many people are making some of the same mistakes they were making at the end of the recession. Even as their financial situations have improved, many consumers remain confused by important financial concepts. Many scored poorly on a financial literacy test from the foundation that gauged their understanding of the financial forces that affect how much they can buy with their paychecks, how much they pay for a home and how much risk they take with their savings.
The questions “were meant to really not test deep specific knowledge, but to cover a series of questions that people would encounter day to day,” Gerri Walsh, president of the FINRA Investor Education Foundation, said about the financial literacy questions asked in the survey.
Overall, consumers understood some of the money topics at hand. Only 14 percent of respondents answered all five questions correctly. Thirty-seven percent answered at least four of the questions correctly, down slightly from 42 percent in 2009.
When you look at the topics people were polled on, which include interest rates, inflation, bond prices, mortgages and investment risk, the share of people who answered each question correctly has barely changed over the years. That suggests that even as more people returned to work after the recession and found financial stability, they remained vulnerable to making costly financial mistakes.
For consumers using credit cards or taking out other high-interest loans, misunderstanding how interest charges are added to their debt can lead them to end up with a bigger debt load than expected, or extend the amount of time it takes to pay off their balance.
Who aced this quiz? Higher earners, or those making more than $75,000 a year, answered more questions correctly on average than people earning less than $75,000 a year. Consumers 55 and older and those with an undergraduate degree or more also had higher scores.
Wondering where you stand? Take the quiz below or visit FINRA’s website to see how you compare with others in your state or region.