Wednesday, January 10, 2018

Do you really understand money?

Most Americans don't, according to a survey, and that ignorance is costing them money.
Americans lack of knowledge about their personal finances costs them an average of $1,171 per person, according to a survey of more than 1,500 people released this month by the National Financial Educators Council. And nearly one in five estimated that their lack of know-how cost them $2,500 or more.
In a separate survey Wells Fargo interviewed 2,300 adults and found four basic financial questions that people couldn’t answer. Here's one. How would you answer?

Which of the following statements describes the main function of the stock market?
A) The stock market brings people who want to buy stocks together with people who want to sell stocks.
B) The stock market helps predict stock earnings
C) The stock market results in an increase in the price of stocks
D) None of the above
E) Not sure
The correct answers is A, and 44 percent of boomers got it right, compared to just 39 percent of millennials. What’s more, many millennials — rather than answering that they didn’t know — got the question wrong. Fully 17 percent answered B (compared to just 6 percent of boomers) and 11 percent answered C (versus 4 percent of boomers).

Test yourself on these other three questions.

If you had $100 in a savings account and the interest rate was 2 percent per year, after 5 years, how much do you think you would have in the account if you left the money to grow?
A) Exactly $102
B) Less than $102
C) More than $102
D) Not sure
If the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year, after 1 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) Not sure
Which provides a safer return, buying a single company’s stock or a mutual fund?
A) Single company’s stock
B) Mutual fund
C) Not sure
Check your answers here.

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