# Can You Pass This [Global] Financial Literacy Test?

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Happy Friday! Came across another financial literacy test and of course had to take it ;)

This one comes from Standard & Poor’s Rating Services’ Global Financial Literacy Survey which I caught off Bloomberg.com because I’m reading fancy pants news sites now (hah – not really, I only go there if my favorite newsletters send me :))

Here’s the test – see how you do!

1. 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?
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?
3. 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?
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?
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? [Multiple choice here: more than \$150, exactly \$150, less than \$150, or don’t know]

That’s a lot of supposing :)

But suppose you answer these questions right now – what would you score?

According to Standard & Poor, if you get 3 out of the 4 correct you’re “financially literate.”And if you’re wondering why there are 5 questions there instead of 4, it’s because #4 and #5 both go together (why they couldn’t be merged into one I can’t tell you…).

Here are the answers – don’t cheat!

1. 100 U.S. dollars plus three percent
2. The same
4. More
5. More than \$150 dollars

How’d you do? 4 out of 4? 3 out of 4? 1 out of 4?

If you got the last one then I’m shutting down this blog forever because I suck at my job :( If, however, you got the second one (3 out of 4) then welcome to the cool table – population you and me! Even though, yes, I SHOULD HAVE GOTTEN ALL FOUR RIGHT because all I do is think about money every day!! Arghh…

Question #2 tripped me up, like always… (I hate inflation) But seriously – who would pay double the amount for a car or house even IF you got paid double?? No way in hell I’m paying \$700,000 for a house or double for a car/vacation/etc – I’d downsize/go without! Just because you make more doesn’t mean you have to spend more, jeesh…

I should email them this:

But whatever. I’m still literate :)

Here were some interesting results when people all over the world took it:

• U.S. citizens scored worse than other major English-speaking economies (Canadians and UK’ians beat us out by far)
• In major emerging economies, it’s the 15- to 35-year-olds showed the highest percentage of financial literacy in major emerging economies
• 36- to 50-year-olds did better in major advanced economies
• Only 35% of respondents – globally – got the right answer to question #3 (this shocked me!!)
• Many homeowners can’t calculate the basic interest owed on their loan payments.

What all this means is that if you’re on a blog right now talking about money, you probably know more than most of the world :) So pat yourself on the back and be thankful you caught on when you did!

Here are more quizzes we’ve taken over the years if you want to avoid work some more:

See ya back on Monday!

Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!

1 Mrs. Money Monster December 4, 2015 at 6:04 am

Just got done patting myself on the back ;) I scored 5/5, but I’m also in the “36- to 50-year-olds did better in major advanced economies” group. Oh, the horror. However, as a scientist by trade, I felt each question was missing a TON of information. But, I went ahead and concluded that this was a very elementary quiz and I shouldn’t assume that EVERYTHING would double or that the one company I could invest in would be Apple, Inc. Just sayin’ So, I feel like I kinda cheated. Oh well. It was still a hoot to take this quiz at 6am! And I do think that, since I’m the type of person getting up early to read financial blogs before, I would perform better on this type of quiz. It’s still sad (but not shocking) that US citizens scored poorly. Fun post!

Rock on!

2 J. Money December 7, 2015 at 6:24 am

Haha, glad you enjoyed it :) It was def. elementary!

3 Darrell December 9, 2015 at 2:28 pm

Right, question number 2 could have been false if the person went into a higher tax bracket.

4 Hannah December 4, 2015 at 6:25 am

I was 5/5, but I did have a snarky answer for #2 (I can buy more because I’ve got compounding interest on my side).

Diversification (and portfolio risk) are not easy for most people to understand because most people are never taught that there is such a thing as modern portfolio theory, and that your investing goal should be to get out of the market what it’s offering.

5 jestjack December 5, 2015 at 8:10 am

I’m with you on #2…. kind of subjective. I’m thinking if everything doubled you would be ahead because investments and wages would have outpaced expenses…

6 J. Money December 7, 2015 at 6:27 am

Also taxes, which I never considered before! If you’re making double your tax rate changes drastically too (good call, you smarty pants commenters! :))

7 Charlie December 4, 2015 at 6:44 am

J\$ – what a fun quiz! I thought #2 was trying to trick me in some way. It seemed pretty obvious.

I loved #5, because it shows you the power of compound interest on a very basic level.

8 S L December 4, 2015 at 7:09 am

I kept wanting to put compound interest on the first question, finally realizing I did not have enough information. Right, simple interest. Who does simple interest these days? *laughs

SL

5/5

9 Bill Westrom December 4, 2015 at 12:38 pm

On debt, on the debt side of the ledger it’s ALL simple interest! Interest calculated on debt is always simple interest. It is illegal to charge interest on interest. Interest on a mortgage, credit card, car loan or student loan is ALWAYS simple interest.
Compound interest ONLY pertains to the asset or investment side of the ledger…as long as the interest gained/earned remains in the investment vehicle…that’s when you are earning interest on interest earned…that is compounding interest.
FYI: You had all the information needed in the first question to answer the question.

10 J. Money December 7, 2015 at 6:30 am

For real? It’s illegal to charge interest on interest?

11 superbien December 7, 2015 at 8:01 am
12 superbien December 7, 2015 at 8:04 am

Because credit card debt is compounded daily, and other debt (car, house, education) is simple, the first question does not have enough information to answer.

13 Freedom 40 Guy December 4, 2015 at 7:17 am

Just shocking and sad that people in the U.S. score so low on a simple quiz such as this. Just another reminder that we are utterly failing our young people when it comes to providing them basic foundational elements to be successful in life. If you and your readers are interested in helping young people develop basic financial skills, consider volunteering or donating with Junior Achievement, a great organization dedicated to helping kids develop in this important area that somehow our school system continues to neglect.

https://www.juniorachievement.org/web/ja-usa/home

14 J. Money December 7, 2015 at 6:30 am

Will check it out!

15 superbien December 7, 2015 at 7:42 am

I like to jump on the ‘ people are so stupid!’ band wagon, but these questions are pretty appallingly poorly stated, and without enough informant. You basically have to know the subject, analyze the purpose of the survey, make an educated goes at what the survey writers are trying to say, and then answer accordingly. That’s a much higher level of literary and psychological analysis, layered on top of basic financial literacy.

16 J. Money December 7, 2015 at 7:48 am

Haha… either that or we’re just all nerds.

17 superbien December 7, 2015 at 8:09 am

Unpossible!

Ok, likely what you said :)

It was useful though… researching simple vs compound interest on debt clarified the answer in my mind, where before it was kind of mushy.

18 Roy Largo @ Band of Savers December 4, 2015 at 7:19 am

Got all 5 correct. But I would have liked to see them specify a time limit on the first question. I had to just assume that it was for a one year period but if it had been a 2 year loan then the answer would have been different.

I’m supprised by the results that they found after administering this “test” (wish my actuarial exams had been this easy). But this served as a good little sanity validation.

19 Emily @ JohnJaneDoe December 4, 2015 at 7:56 am

I fell into the blogger trap on 2 and overthought it and said “it depends”.
If you’re spending is under control, you can spend the same. If you’re overspending, you can probably spend less because interest will be higher and compounding.
Yeah, overthought.

20 Penny @ She Picks Up Pennies December 4, 2015 at 8:09 am

I mostly just want to find the bank that’s paying out 10%. My own financial literacy quiz was something along the lines of “How long can you keep part of a Roth IRA locked in a bank CD before even the bank tells you you’re a fool?” ;)

21 J. Money December 7, 2015 at 6:32 am

Hahahha

22 Kalie @ Pretend to Be Poor December 4, 2015 at 8:17 am

These word problems are causing flashbacks to middle school. I loved the quiz but hated middle school, so I’m not sure how to feel right now :) And if only on the 10% bank rate!

23 Justin @ Root of Good December 4, 2015 at 8:20 am

I love #3’s supposition. “Suppose you have some money.” Keep doing that enough and you’ll be a millionaire. Supposedly. :)

The results don’t surprise me to much. I tend to be an optimist about the human condition and how smart everyone is. But there’s no fooling around the fact that a lot of people can’t math. This translates into a huge failure when it comes to finances because people can’t understand the basic concepts tested in this quiz.

24 Bill Westrom December 4, 2015 at 12:30 pm

Justin…I like the fact that you mentioned your awareness of the human condition. Understanding the human condition, including my own, has led me to be far less judgmental of people and their human condition…including their financial condition…which is part of their human condition. I will however disagree with your statement; people can do math. To answer the questions to the quiz only required 3rd grade math skills.They can do math, but they just don’t understand how to apply it properly to their financial condition. They’ve just never been taught properly. One’s human/financial condition is multi-layered and you have to go all the way to the bottom layer, the foundation of their financial acumen. A poor financial education and very weak curriculum is the root of the problem.

25 Cathy December 4, 2015 at 8:21 am

5/5 for me too!! Definitely no need to shut down the blog just yet, J. Money!! :)

26 Chris @ Flipping A Dollar December 4, 2015 at 8:37 am

I got all 5 (4?) but I was really second guessing myself. I had to use Excel for the last one. :)

Now where’s my prize? I was hoping for 750k. Thanks in advance. ;)

27 J. Money December 7, 2015 at 6:35 am

You can read all 750k of my blogs posts on this site :) Though actually there are only 2k so you’ll have to do it over the next 100 years.

28 Amanda December 4, 2015 at 9:10 am

I got all 5 as well, but like Mrs. Money Monster, I’m in that same age bracket, and I wanted more information. Wahhh! But they all seemed incredibly obvious to me if we were going super-simple, though. With number two, think of it as “your buying power is cut in half” instead of “your money doubles.” Saddening, but so true.

29 Brian @ Debt Discipline December 4, 2015 at 9:10 am

5 of 5. #2 was a little tricky. A great quick quiz to test you financial skills. Thanks J\$.

30 [email protected] December 4, 2015 at 9:52 am

I got one wrong and it was a stupid one (I’ll hang my head in shame and confess I got the first one wrong because I didn’t focuse and was thinking of 30 rather than three per cent). A good one :).

31 J. Money December 7, 2015 at 6:37 am

Minor detail :)

32 Lucas December 4, 2015 at 10:05 am

I think #2 is wrong or at least poorly worded. If prices doubled today and my income doubled i would not be able to buy twice as much as a larger percentage of my income would be taken up by taxes due to the progressive tax bracket structure. So given no other changes (like reduction in taxes which seems unlikely), i would be able to buy less than i could today ;-)

33 J. Money December 7, 2015 at 6:37 am

Ahhh TRUE! I can’t believe I missed that one – good call.

34 Chris December 11, 2015 at 12:18 pm

This was my thought as well! Glad someone else caught this too

35 Lisa O December 4, 2015 at 10:33 am

5/5 what a good Friday morning for me :) Won’t lie had to read and re-read #2 a few times to make sure I could think it thru. I think that is what over 50 does to you on word problems…way out of practice!

36 Bill Westrom December 4, 2015 at 10:37 am

Silliest thing I’ve ever seen. Is Financial Literacy the real problem or is it the curriculum?
This test or any other like it isn’t a good measurement of what people know. It’s a perfect example of a weak curriculum being taught and weak instructors.
IT’S THE CURRICULUM PEOPLE.

37 J. Money December 7, 2015 at 6:39 am

Could be true indeed… But it got us all thinking and talking about it right? That’s the point of posting this stuff up, outside of having a little nerd fun with it ;)

38 Maggie @ Northern Expenditure December 4, 2015 at 10:49 am

I’m glad you missed #2 as well. I was feeling like a failure! But yes, I got the other ones right.

39 Kristi @ Femme Frugality December 4, 2015 at 10:56 am

That was a fun little quiz. I answered 5/5 correctly, but it was touch and go on number 2. I really financial literacy was more of a concern in schools. I wouldn’t have been able to answer any of those correctly if I hadn’t taken an interest in finances on my own.

40 Money Beagle December 4, 2015 at 11:02 am

I got all five right, though I did nearly second guess myself on #2

41 jennydecki December 4, 2015 at 1:07 pm

I got them all right but as I was answering the questions I was certain every one was a trick question. But hey, my problem has never been the math, it’s been the consistency and income we’ve struggled with. Totally different set of problems and I am thrilled there isn’t an Internet quiz to tell me how horribly I would stack up to other people on understanding how jobs and careers and income works in a real world scenario. It took us way too long to figure out!

42 J. Money December 7, 2015 at 6:41 am

You’re certainly not alone on that, I can tell you that much! Always nice to see you stopping by here – you’ve been reading the blog for years now! :)

43 Joe December 4, 2015 at 1:49 pm

5/5, easy peasy. I guess that’s a bit unfair because I write and read about personal finance almost everyday. Still, this is basic math/economic. Everyone should at least get 3/5…

44 superbien December 7, 2015 at 7:55 am

Borrowing \$105 vs \$100 + .03 — isn’t this question useless without a time frame and parameters (simple vs compound). If we’re talking borrowing from a buddy, \$103 is obviously lower.

If we’re talking house or car or student loans, those are simple interest (so still \$103), but aren’t credit card loans compound interest? (My understanding of why they are so delighted for you to only pay the minimum)

45 superbien December 7, 2015 at 7:58 am
46 Shannon @ Financially Blonde December 4, 2015 at 2:19 pm

I got them all right but that’s my job. :-) I hate inflation too and I think it’s something that not enough people focus on. Even though it’s low in the US now (2-3%) we are not staying ahead of it by keeping our cash in bank accounts earning less than 1%. So unless you are making more income every year, if you are just invested in cash, you are actually losing money every year because of inflation.

47 J. Money December 7, 2015 at 6:42 am

Good point! Although saving *something* in savings is better than *nothing* in savings – even if your money depreciates.

48 superbien December 7, 2015 at 8:26 am

It’s such a good point!

It seems, though, that inflation doesn’t hit all areas the same. I look at the cities I have lived in (inflation!!!) and the small towns I drive through (so cheap!) and wonder about how to game that system.

Assuming a steady income in both a thriving city and poor backwater town (often the worst assumption in the latter, but follow me down this road; maybe imagine retiring with steady investment income)…

In the thriving city, prices go up and explode in certain categories (\$20k houses turn into \$1.5M houses, transit, alcohol in bars).

In the depressed town, those areas don’t explode (stagnant house prices even after generations, like my friend’s home house, or only modest inflation), there is no transit but gas is cheap, and prices in stores and groceries are lower than big cities (in part because they don’t have some of the fancier items, but simple healthy cooking is still possible).

Doesn’t that mean that to some extent inflation is a reflection of location?

49 J. Money December 7, 2015 at 10:46 am

Interesting to think about! If only we could move our friends and family along with us to these cheaper areas, haha…

50 Stockbeard December 4, 2015 at 2:32 pm

Everyone reading this blog and other financial blogs will probably get 4 or 5 answers right :)

51 Kyle December 4, 2015 at 4:08 pm

If your income doubles, wouldn’t you have a higher overall tax rate? So you would have less than double your current money to spend?

52 J. Money December 7, 2015 at 6:42 am

Haha yup – something y’all are catching that I didn’t originally, good job :)

53 margaret December 4, 2015 at 5:56 pm

I only got #2 wrong & I believe I was correct. I don’t think you would be able to buy as much even if your salary doubled if everything else doubled. I agree with the others about the higher tax rate.

54 Vaughan December 4, 2015 at 6:00 pm

#2… THE ANSWER IS CLEARLY LESS, although governments would like you to not understand why.

a.). If a product is \$100 today, and income is \$100 , after 25% income tax it turns into \$75. I am \$25 short.

b.). If a product is \$200 (double), and I get a \$200 (double) income, after 25% income tax it turns into \$150. I am \$50 short.

Clearly… the purchaser has lost purchasing power.

This doesn’t even factor in an increase in tax brackets, weigh in the future could be adjusted for inflation perhaps.

however this is why governments like inflation… it increases their profit margins.

55 J. Money December 7, 2015 at 6:43 am

I think you need to send them a lovely note ;)

56 Jayson @ Monster Piggy Bank December 4, 2015 at 9:21 pm

I got 3 out of 5. So I kinda passed this global financial literacy test and it seems like I may need to study more. I liked this test actually and would share it with my colleagues.

57 Jason @ Islands of Investing December 5, 2015 at 1:34 am

What an eye-opener – shocking that there are so many people who can’t answer most of these! It’s like saying 50% of US citizens don’t know how to brush their teeth…

Financial literacy obviously needs some major, major attention – thank goodness there are more and more of these blogs filling the internet :)

58 Sense December 5, 2015 at 4:15 am

NOOOO! The answer for #2 is that you can buy less because of the higher taxes on the doubled income! That’s so obvious! What’s wrong with those quiz-makers?!

Haha, I hate being wrong…

59 Anita December 5, 2015 at 7:54 am

Cmon, that was just simple maths!
I just can’t believe that anybody can’t solve this questions.

60 Rachel December 5, 2015 at 12:24 pm

Like many others here, I got 2 wrong because I said less due to taxes. However I think they are wrong and will give myself 5/5!

61 J. Money December 7, 2015 at 6:46 am

62 Thias @It Pays Dividends December 5, 2015 at 12:43 pm

Yes! 5/5 – Way to boost up the ego a bit :P

I’d also love to find out where this 15% savings account is!

63 Ornella December 6, 2015 at 12:29 am

Long time reader. First time commenter. Feeling pretty good about myself because I got all right woot woot! Your financial lessons are paying off :D

64 J. Money December 7, 2015 at 6:52 am

Huzzah! Thanks for reading and saying hello – your name is so beautiful!

65 Paula at Afford Anything December 6, 2015 at 2:50 pm

I got 5/5, although I thought to myself: “Question #2 is tricky … doubled income would put me in a higher tax bracket; therefore I could buy less. But I bet that’s not the answer that I’m supposed to give …”

66 Brittney @ Life On A Discount December 6, 2015 at 10:07 pm

Interesting quiz! I got almost all of them right, I misread the last question. The results of other countries is interesting as well. Financial literacy is so important and I wish we put a great emphasis on learning it at a younger age.

67 Mindy R December 7, 2015 at 12:01 pm

5 out of 5 baby yeah!!! (I’m a 31 yo US resident)