Friday, May 9, 2014

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

Business Insider ^ | 05/09/2014 | Cullen Roche
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.
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