Can you answer these 5 basic questions about money?
A recent survey by Kathleen Elkins on CNBC Money indicates what our fear has been for a while- or at least what my fear has been. Are these questions so hard? What does this say about the future of our country? Isn’t most of this math 101?
Many young people never learn money basics. I still can’t believe that less than half of U.S. states require high school students to take a personal finance class before they graduate. I’ve said for a long time that we should start introducing basic finance classes early in school. I’m talking about introducing them in grade school. Unfortunately results on surveys and retirement IQ tests show a lock of financial knowledge. Recent research indicates my point.
Here's one question about retirement, asked on Fidelity Investments retirement IQ test, that stumped 84 % of respondents:
1): If you were able to set aside $50 each month for retirement, how much would that end up becoming 25 years from now, including interest, if it grew at the historical stock market average?
A. About $15,000
B. About $30,000
C. About $40,000
D. About $60,000
E. More than $60,000
Here are three questions, from a survey conducted by economists Annamaria Lusardi and Olivia Mitchell, that puzzled most Americans. Only 30 percent of respondents answered all three correctly:
2): Suppose you have $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow?
A. More than $102
B. Exactly $102
C. Less than $102
D. I don't know
3): Imagine that the interest rate on your savings account was one percent per year and inflation was two percent per year. After one year, how much would you be able to buy with the money in this account?
A. More than today
B. Exactly the same as today
C. Less than today
D. I don't know
4): Do you think the following statement is true or false: Buying a single company stock usually provides a safer return than a stock mutual fund?
True or False
Finally, in a survey conducted by 401(k) provider Betterment for Business, less than 50 percent of respondents correctly answered:
5): What is a fiduciary?
Just 42 % of respondents correctly identified the definition of a fiduciary, Betterment reports.
If these five questions tripped you up, you're not alone.
We haven’t spent enough time with our kids educating them on the basics of money. If you have kids, don’t you want them to prosper? Don’t you want them to have a better life financially than you? It’s obviously not everything we should teach our kids, but it will help change the trajectory of their life. I promise.
Answers:
1: C
2: A
3: C
4: False
5: A fiduciary is a person or organization that owes to another the duties of good faith and trust. It’s the highest legal duty of one party to another. It also involves being bound ethically to act in the other's best interests. A fiduciary often involves managing the assets of another person, or of a group of people. Duties are both legal and ethical.