Most American's cant answer these money questions

So what is it that Americans don’t understand about their money? Data  released by Wells Fargo — which surveyed 2,300 adults — in October  sheds some light on four basic financial questions that people couldn’t  answer. The financial firm asked both millennials (ages 20-36) and  boomers (ages 53-71) these questions. Boomers, overall, did better than  millennials. Here’s a look at the questions and what they scored.

Which of the following statements describes the main function of the stock market?

  1. A) The stock market brings people who want to buy stocks together with people who want to sell stocks.
  2. B) The stock market helps predict stock earnings
  3. C) The stock market results in an increase in the price of stocks
  4. D) None of the above
  5. 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).

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?

  1. A) Exactly $102
  2. B) Less than $102
  3. C) More than $102
  4. D) Not sure

The right answers is C, “more than $102.” Fewer than three in four  millennials got that right (73 percent) compared to more than eight in  10 boomers (82 percent). The second most popular answer for millennials  was “exactly $102” (10 percent said that versus 3 percent of boomers).

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?

  1. A) More than today
  2. B) Exactly the same as today
  3. C) Less than today
  4. D) Not sure

Fewer than half of millennials got this question right (40 percent) —  the correct answer is “less than today” — compared to 73 percent of  boomers.

Which provides a safer return, buying a single company’s stock or a mutual fund?

  1. A) Single company’s stock
  2. B) Mutual fund
  3. C) Not sure

About half of millennials answered this question correctly (51  percent) — the correct answer is “mutual fund” — compared to two-thirds  of boomers.

The reason more boomers correctly answer these questions, as compared  to millennials, is likely because they have many more years of saving  and investing experience than their millennial counterparts. And  frankly, neither age group is particularly adept at financial literacy:  One study showed that two-thirds of Americans would not pass a basic  financial literacy test.



Tammy's Blog

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