The Average American Can't Answer These Three Simple Finance Questions

[Mabs]

Personal Finance Ignorance - Business Insider

Here’s a frightening fact via The Atlantic’s Moises Naim. Roughly half of the world can’t answer these three questions correctly:

1. Suppose you had $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) do not know; refuse to answer.

2. Imagine that the interest rate on your savings account is 1 percent per year and inflation is 2 percent per year. After one year, would you be able to buy A) more than, B) exactly the same as, or C) less than today with the money in this account?; D) do not know; refuse to answer.

3. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.” A) true; B) false; C) do not know; refuse to answer.

Even worse – 70% of Americans can’t answer all three questions correctly. And we wonder why the world seems to have so many persistent financial problems. We don’t even come close to understanding the construct of money or how it should be used. The world desperately needs to become better educated on the topic of money, finance and economics. It certainly won’t solve all of our financial problems, but information really is power when it comes to money. Unfortunately, we don’t even teach basic finance in most schools and economists can’t even agree on what “money” is in the first place. We have a long road ahead of us but it’s not too late to get started….

* answers (which no one reading Pragcap should need) are 1-A; 2-C; and 3-B.



Read more: The World’s Shocking Financial Ignorance | PRAGMATIC CAPITALISM

 

[jarves]

And yet America is the superpower of the world.So what does it tell you??
It means that people of other countries are way more dumber and that is even more shocking.

 

[Sam1980]

Even asking these questions is insulting. No wonder people didn't answer them.

 

[anonymus]

Americans are dumb but rest of the world is dumber.

People should understand that usually average means incompetent.

 

[Mabs]

And yet America is the superpower of the world.So what does it tell you??
It means that people of other countries are way more dumber and that is even more shocking.

It tells me that you should brush up on your deductive reasoning skills. There are no simple conclusions here, neither am i making any. This article points to a problem which most Americans already know of - the declining state of the american education system.

Americans are dumb but rest of the world is dumber.

People should understand that usually average means incompetent.

Not really. US edges out the world in many fields but also lags behind in many as well. To quickly understand what I'm saying, watch the opening scene of a show called The Newsroom. The stats quoted in that scene are real.

 

[VCheng]

And yet America is the superpower of the world.So what does it tell you??
It means that people of other countries are way more dumber and that is even more shocking.

Good point, but how many people in the world have $100, or the equivalent thereof, to put in a savings account that such questions need to be answered?

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Oh BTW, let us look at this paragraph in particular:

In Russia, 96 percent of those surveyed could not answer the three questions correctly. While that might be expected of a post-communist nation, the mecca of capitalism didn’t exactly yield glowing results—only 30 percent of Americans aced the quiz. The best-performing respondents were the Germans (53 percent got a perfect score) and the Swiss (50 percent), but this still leaves almost half of each country’s population without a basic understanding of financial matters. In countries with relatively strong economies, the numbers are sobering: 79 percent of Swedes, 75 percent of Italians, 73 percent of Japanese, and 69 percent of French could not respond correctly to all three questions.

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But no, let us worry about the state of education in USA!

 

[fallstuff]

I would expect Israel to score the highest in this test.

 

[Khan_patriot]

I answered all three correctly, give me my Nobel prize in economics....

 

[TheNoob]

Americans are dumb but rest of the world is dumber.

People should understand that usually average means incompetent.

So you agree to be more dumber than them?