April 2024

Are you ‘financially literate’ or a ‘financial ignoramus’?

The US firm S&P conducted a worldwide survey to assess ordinary people’s ‘financial literacy’.

‘Financial literacy’ doesn’t mean being a Harvard MBA or qualified accountant. It just means being able to understand some very simple concepts about money which would enable people to make the right decisions about where to put their savings.

To be considered ‘financially literate’ respondents just had to get the right answers to three of the following five questions.

A. RISK DIVERSIFICATION 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

  1. one business or investment?
  2. multiple businesses or investments?
  3. don’t know
  4. refused to answer

B. INFLATION 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

  1.  less than you can buy today?
  2. the same as you can buy today?
  3. more than you can buy today?
  4. don’t know
  5. refused to answer

C. NUMERACY (INTEREST) Suppose you need to borrow 100 US dollars. Which is the lower amount to pay back:

  1. 105 US dollars?
  2. 100 US dollars plus three percent?
  3. don’t know
  4. refused to answer

D. COMPOUND INTEREST 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?

  1. more?
  2. the same?
  3. don’t know
  4. refused to answer

E. COMPOUND INTEREST Suppose you had 100 US 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?

  1. more than 150 dollars?
  2. exactly 150 dollars?
  3. less than 150 dollars?
  4. don’t know
  5. refused to answer

I’ll give the answers and the results tomorrow

7 comments to Are you ‘financially literate’ or a ‘financial ignoramus’?

  • Andrew Eaves

    I’m just a hard working chap in the IT industry, now as I’m more older I can only secure a low paid contractors job thanks in part to the ‘wonderful’ EU amongst other things and this years take home pay has been eroded in a hike on taxes where now the government disallows a tax break on subsistence. Yet I can answer these questions fine, like I would think most of your readers. Isn’t it amazing that so many managers, executives, directors, politicians and the chancellor can’t grasp this simple concept!!! You could not make it up. No wonder so many western countries are screwed up! Only viable solution I see is Trump and Farage.

  • Mighty Mario

    Draghi’s tightens his grip on Eurolands remaining freedoms.They will own you and your earning potential, whatever they say will go, like it or not.

    Scrapping the €500 bill.

    European Central Bank continues to spark debates due to the loose monetary tools it uses in an attempt to boost inflation in the eurozone, the recent decision to scrap the €500 banknote — permanently stopping its production and issuance by the end of 2018.

  • Mighty Mario

    David Cameron’s (Dodgy EU salesman) London,

    Introducing The London Kleptocracy Bus Tour.

    The City is a semi-offshore state, a bit like the UK’s crown dependencies and overseas territories, tax havens legitimised by the Privy Council. Britain’s financial secrecy undermines the tax base while providing a conduit into the legal economy for gangsters, kleptocrats and drug barons.

    Even the more orthodox financial institutions deploy a succession of scandalous practices: pension mis-selling, endowment mortgage fraud, the payment protection insurance con, Libor rigging. A former minister in the last government, Lord Green, ran HSBC while it engaged in money laundering for drug gangs, systematic tax evasion and the provision of services to Saudi and Bangladeshi banks linked to the financing of terrorists. Sometimes the UK looks to me like an ever so civilised mafia state.

  • MGJ

    I dread to think what the results will be but I expect ignoramuses will carry the day. After all, our highly educated politicians all believe that a gazillion dollar debt which increases every year is perfectly sustainable. Ditto immigration. Ditto welfare. Ditto government.

  • Andrew Eaves

    News from the UKIP leave campaign:-

    New petition calls for inquiry into Government lies

    Keith Phair, UKIP branch chairman at Suffolk Coastal, has had his petition demanding ‘a public inquiry into the UK Government’s culture of lying to the voters’ accepted online. Please sign here and feel free to share it. It’s timely and with just 10,000 signatures is guaranteed to elicit a formal response which could only be a good thing for the Leave campaign.

  • Andrew Eaves

    Of course the link did not attach!
    A public inquiry into the UK Government’s culture of lying to the voters

  • Caratacus

    Could I have the address of the bank in question D, please 🙂

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