Less Than 3 Percent Of Americans Can Pass This Six-Question Money Quiz
Most Americans don’t know the basics when it comes to money.
The results of surveys and retirement IQ tests show a startling lack of financial literacy.
When GoBankingRates put Americans to the test with a six-question money quiz, less than 3 percent of respondents passed.
“Only 49 out of 2,001 respondents answered five out of six of the questions correctly, which translates to 83 percent or a ‘B,'” the personal finance site reports. “The majority wouldn’t even get a passing grade on this financial quiz because they answered four or fewer of the six questions correctly, which is a 66 percent or lower.”
Read on to test your own knowledge.
1. What are the three major credit bureaus?
A. Capital One, Bank of America and JPMorgan
B. Deloitte, KPMG and Ernst & Young
C. Fannie Mae, Freddie Mac and Sallie Mae
D. FICO, Moody’s and Fitch
E. TransUnion, Equifax and Experian
F. Visa, MasterCard and American Express
The Answer Is E: TransUnion, Equifax and Experian, which 59.9 percent of respondents answered correctly. The three major credit bureaus collect all of your credit information and pull it together into a single report. The bureaus then sell these credit reports to lenders, insurers, landlords or anyone else who needs to review your credit.
2. True or False: A 401(k) refers to a tax credit for retirement
The Answer Is False, which 51.8 percent of respondents answered correctly.
A 401(k) plan is not a tax credit. Rather, it’s a retirement savings account offered by many employers that allows you to contribute pretax dollars. In 2018, employees who participate in the employer-sponsored plan will be able to contribute as much as $18,500 per year.
3. Of the following, what best describes what “APY” is?
A. Adjusted prices for inflation
B. Annual rate charged for borrowing or earned by an investment
C. Annual rate of return accounting for compounding interest
D. Annualized principal payment amounts
E. Annuity payout per year
F. Automated payment
The Answer Is C: Annual rates of return account for compounding interest, which 12.6 percent of respondents answered correctly. APY, not to be confused with APR (annual rate charged for borrowing or earned by an investment), takes compounding, or earning interest on the interest that you previously earned, into account.
4. True or False: Income does not impact your credit score
The Answer Is True, which 40.5 percent of respondents answered correctly.
Your income does not directly affect your credit score. Your payment history, amounts owed, length of credit history, types of credit used and how many new credit accounts you have can all affect your score.
5. What does a CD offered by a bank stand for?
A. Capital deferment
B. Certificate of deposit
C. Collateral default
D. Collateralized discount
E. Commodity dividend
F. Credit dividend
The Answer Is B: Certificate of deposit, which 65.8 percent of respondents answered correctly.
A certificate of deposit is a savings account that offers a higher interest rate and fixed date of withdrawal. With a CD, you’re trading convenience for interest: You agree to let your money sit tight for a set number of months or years and, if you withdraw your money early, you’ll be charged a penalty.
If you can be patient, though, you’ll be rewarded with returns of about 2 percent or more.
6. What’s the difference between a savings account and a checking account? Select all that apply
A. Only savings accounts earn interest
B. A savings account can’t be used for automatic bill pay
C. Only checking accounts have overdraft fees
D. You can only transfer money from checking accounts to savings
E. Checking accounts are designed for regular use
F. Savings accounts are designed for investing long term
The Answer Is E and F: Checking accounts are designed for regular use, which 55.3 percent of respondents answered correctly, and savings accounts are designed for investing long term, which 43.8 percent of respondents answered correctly.
If these questions tripped you up, you’re not alone. To boost your financial literacy, check out the smartest things to do with your money in your 30s, a definitive guide to retirement savings accounts and the smartest way to invest your money.
Source: CNBC