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The Average American Can't Answer These Three Simple Finance Questions
Business Insider ^ | 05/09/2014 | Cullen Roche

Posted on 05/09/2014 8:48:55 AM PDT by SeekAndFind

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.

(Excerpt) Read more at businessinsider.com ...


TOPICS: Business/Economy; Society
KEYWORDS: economy; finance; interest; investment; livs; wealth
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1 posted on 05/09/2014 8:48:55 AM PDT by SeekAndFind
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To: SeekAndFind

2+2 =

Anybody? Bueller?


2 posted on 05/09/2014 8:51:44 AM PDT by cuban leaf
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To: SeekAndFind

D) oh, crap....just let the gubmint do it for me


3 posted on 05/09/2014 8:52:52 AM PDT by Buckeye McFrog
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To: SeekAndFind

A, C, & B.

How’d I do?


4 posted on 05/09/2014 8:52:56 AM PDT by rjsimmon (The Tree of Liberty Thirsts)
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To: SeekAndFind

Depending on who’s asking D could be the right answer - refuses to answer.


5 posted on 05/09/2014 8:55:06 AM PDT by DManA
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To: rjsimmon

About as well as most Freepers would do.


6 posted on 05/09/2014 8:55:06 AM PDT by Yo-Yo (Is the /sarc tag really necessary?)
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To: SeekAndFind

Love the see the answers from Obama’s economic advisers.


7 posted on 05/09/2014 8:55:11 AM PDT by AU72
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To: SeekAndFind

Idiocracy


8 posted on 05/09/2014 8:55:50 AM PDT by ChildOfThe60s ((If you can remember the 60s.....you weren't really there)
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To: rjsimmon; SeekAndFind

Why have “refuse to answer”? If somebody doesn’t want to cooperate, just haul them away.


9 posted on 05/09/2014 8:56:04 AM PDT by Genoa (Starve the beast.)
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To: rjsimmon

OK...now you’re just showing off. ;-)


10 posted on 05/09/2014 8:56:04 AM PDT by Sergio (An object at rest cannot be stopped! - The Evil Midnight Bomber What Bombs at Midnight)
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To: SeekAndFind

Count me as one of the stupid. I’d answer the third question “it all depends on which stock and which mutual fund.”


11 posted on 05/09/2014 8:56:21 AM PDT by Mamzelle
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To: SeekAndFind
You might want to start with the percentage of Americans who can read the questions. Illiterates and non English speakers make up 20-25% of the population?

Next, how many of the remaining actually comprehend the question? Another 25%?

There is hope, most of the rest got the answer right.

12 posted on 05/09/2014 8:57:26 AM PDT by Former Proud Canadian
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To: rjsimmon

Perfect score.


13 posted on 05/09/2014 8:57:53 AM PDT by Dead Corpse (Tri nornar eg bir. Binde til rota...)
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To: SeekAndFind
And with Common Core math, people will be dumber than ever.

14 posted on 05/09/2014 8:57:57 AM PDT by Lucky9teen (No problem can be solved from the same level of consciousness that created it. ~ Albert Einstein)
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To: Genoa

It always baffled me that someone would take the time to take a survey and answer with some sort of “refuse to answer”.


15 posted on 05/09/2014 8:59:22 AM PDT by MrB (The difference between a Humanist and a Satanist - the latter admits whom he's working for)
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To: Lucky9teen

Blue


16 posted on 05/09/2014 8:59:55 AM PDT by Genoa (Starve the beast.)
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To: SeekAndFind

Eight million have signed up I swear it.


17 posted on 05/09/2014 9:00:29 AM PDT by Fightin Whitey
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To: SeekAndFind

18 posted on 05/09/2014 9:01:53 AM PDT by Svartalfiar
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To: Lucky9teen

Juanita should buy a clue so she knows whether she has 4 or 6 friends. ;-P


19 posted on 05/09/2014 9:02:22 AM PDT by MortMan (I thought I was wrong once, but I was mistaken.)
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To: Lucky9teen

4,800 stickers.

It’s not wrong, but isn’t the answer they are asking for, either.


20 posted on 05/09/2014 9:03:38 AM PDT by MortMan (I thought I was wrong once, but I was mistaken.)
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To: SeekAndFind

The assault on basic math, English and science by the left wing has left us with a nation of numbskulls.

Which is what the liberals want. Numbskull voters will buy the Gorebull warming bs and leave the financial part of their life to the left wing politicians.


21 posted on 05/09/2014 9:04:19 AM PDT by Grampa Dave ( Herr Obama cannot divert resources from his war on Americans!)
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To: Lucky9teen

That’s a joke, right?


22 posted on 05/09/2014 9:05:26 AM PDT by aquila48
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To: AU72

Love the see the answers from Obama’s economic advisers.”

And from most members of Congress.


23 posted on 05/09/2014 9:06:08 AM PDT by Grams A (The Sun will rise in the East in the morning and God is still on his throne.)
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To: Lucky9teen

0, she should ask the government to provide her the stickers becuase she has a right to stickers.


24 posted on 05/09/2014 9:06:38 AM PDT by 1Old Pro
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To: SeekAndFind

If Lawanda has 2 kids and Knesha has 5 who gets more in welfare benefits


25 posted on 05/09/2014 9:07:48 AM PDT by al baby (Hi Mom…)
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To: SeekAndFind

A, C, B

My mom thinks that the bank is the safest place for her money. I can’t get her to understand that with inflation she is actually losing money.


26 posted on 05/09/2014 9:09:33 AM PDT by Gamecock (The covenant is a stunning blend of law and love. (TK))
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To: Svartalfiar

You only proved you cannot divide by zero.

(A-B) = 0


27 posted on 05/09/2014 9:10:11 AM PDT by thackney (life is fragile, handle with prayer)
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To: ChildOfThe60s

“I like money.”


28 posted on 05/09/2014 9:11:05 AM PDT by dfwgator
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To: SeekAndFind
Suppose you had $100 in a savings account and the interest rate was 2 percent per year.

Where is that bank and who do I have to *#@$(@#( to get a 2% rate?

29 posted on 05/09/2014 9:11:26 AM PDT by KarlInOhio (Republican amnesty supporters don't care whether their own homes are called mansions or haciendas.)
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To: SeekAndFind

The average Amercan can’t tell you who the Vice President is.


30 posted on 05/09/2014 9:12:20 AM PDT by bigbob (The best way to get a bad law repealed is to enforce it strictly. Abraham Lincoln)
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To: Svartalfiar

RE: (A-B)(A+B) = B(A-B)

cancel the common factor on both sides

____________________

What could go wrong if you divide 0 by 0?


31 posted on 05/09/2014 9:13:06 AM PDT by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: al baby

If George’s debt was $8 trillion, and Barack’s debt is $17 trillion, how evil do Republicans have to be if they do not want to raise the minimum wage to $10.10?


32 posted on 05/09/2014 9:13:23 AM PDT by Buckeye McFrog
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To: SeekAndFind

Question: You earn $35,000 per year after tax and your living expenses are $30,000 per year. You want to buy a $25,000 car. How many years do you have to save to get it?

Answer: None. I go on food stamps, default on my rent and buy the car immediately. Then when I can’t make the payments, I scream to the newspapwers that the greedy rich bastards at the car dealership are screwing the little guy and force them to forgive my debt.


33 posted on 05/09/2014 9:13:50 AM PDT by Opinionated Blowhard ("When the people find they can vote themselves money, that will herald the end of the republic.")
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To: SeekAndFind

For probably many, many of the LIV types and even others who consider themselves to be “financially knowledgeable”, they have never had a savings account, and would not contemplate having one, as they spend every cent they get as fast as it comes in. They would have no reason to even think about stocks or mutual funds.


34 posted on 05/09/2014 9:14:55 AM PDT by NEMDF
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To: SeekAndFind

PILPUL ALERT

#3 cannot be answered accurately, for two reasons.

First, many individual stocks have a lower beta than many stock mutual funds: for example, Kraft Foods (KRFT) would probably be safer than the Fidelity® Low-Priced Stock Fund (FLPSX).

Second, a “safe return” only occurs when a stock actually appreciates in value, and/or provides a dividend. If the stock market in general is losing value, contrarian stocks will appreciate in value, so buying an SP500 fund or a Russell2000 fund in a stock market recession would provide a negative return, while purchasing a dividend-producing stock of a company providing necessities—like, for example, Kraft—would provide a “safe return.”

Anyone with an IQ of average or better could be taught this, though it generally only begins to be taught in college-level microeconomics courses, or in MBA-level personal finance courses.


35 posted on 05/09/2014 9:15:23 AM PDT by chajin ("There is no other name under heaven given among people by which we must be saved." Acts 4:12)
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To: rjsimmon
Question #3 is rather tricky. B is a somewhat generalized correct rule, but far from the most correct. There are some company stocks which give more stable returns than some, or even the average, stock mutual fund.

While a company stock to a large extent guarantees that you will get a return which mirrors the company's performance, a stock mutual fund guarantees only that the manager will earn a commission.

That's not necessarily a bad thing if the manager or management company earns it. But it is never a good thing if they don't.

36 posted on 05/09/2014 9:16:57 AM PDT by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: KarlInOhio

Interesting math equation : )
*#@$(@#( to get a 2% rate?


37 posted on 05/09/2014 9:18:11 AM PDT by minnesota_bound
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To: rjsimmon
How’d I do?

Same as me. Correct on all three.

38 posted on 05/09/2014 9:18:25 AM PDT by Bloody Sam Roberts (Only Liberals can look at an amendment that says “shall not be infringed" and see blank parchment.)
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To: MrB
It always baffled me that someone would take the time to take a survey and answer with some sort of “refuse to answer”.

“Refuse to answer” was my most common response on the last census form.

39 posted on 05/09/2014 9:19:09 AM PDT by Leaning Right (Why am I holding this lantern? I am looking for the next Reagan.)
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To: Opinionated Blowhard

I just bought a car on Thursday and I knew that the loan rates they were giving me were all the same total amount in the end...
Let’s see, lower the car amount by $500 then raise the interest rate, lower the monthly rate. Lower the interest rate, raise the monthly rate. Throw in some oil changes. You end up paying the same amount for the car. They either get you upfront or in the back end with the financing.

BTW the CarFax readout showed 3 previous owners. One of which had the car repossessed after about 5 months.


40 posted on 05/09/2014 9:20:48 AM PDT by minnesota_bound
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To: Svartalfiar
You just just proved that you do can anything you want if you divide by zero! Your initial statement was that A=B, so A-B=0. Dividing by zero OK in modern math?
41 posted on 05/09/2014 9:21:09 AM PDT by Chemistry Ken
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To: bigbob

It is Joe *#@$(@#( to get a 2% rate? Biden : )


42 posted on 05/09/2014 9:21:18 AM PDT by minnesota_bound
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To: SeekAndFind
#3 I would get wrong. For someone who has basic knowledge of the stock market, they'd be better off choosing one stock rather than leaving it to a mutual fund, where the expenses eat up the profits. What makes the question ridiculous is the cost of purchasing one share of stock. #1....the answer is more than $110....2% a year for 5 years, plus accrual. The choices are somewhat irrelevant.

You want bad? A bank had a "professional" call me about helping me with planning my finances. A savings account is paying .6% interest, and that with restrictions. I asked her "roughly how long would it take my savings to double, using the rule of 72?". She didn't even know what the rule of 72 is! And that's the banks "expert".

43 posted on 05/09/2014 9:22:40 AM PDT by grania
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To: SeekAndFind

I would add the following question.

You have a million dollars invested at 1% interest rate. Can you live off the interest?


44 posted on 05/09/2014 9:24:45 AM PDT by PeterPrinciple
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To: Svartalfiar

A and B are ZERO
Step 7 is a division by zero which has no solution!


45 posted on 05/09/2014 9:25:06 AM PDT by BillM (.)
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To: minnesota_bound

BTW the CarFax readout showed 3 previous owners. One of which had the car repossessed after about 5 months.

______________________________________________

Hope you bought the extended warranty.


46 posted on 05/09/2014 9:25:08 AM PDT by Responsibility2nd (NO LIBS. This Means Liberals and (L)libertarians! Same Thing. NO LIBS!!)
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To: Yo-Yo

Most Freepers could do this test in their sleep.
Those who can’t vote democrat


47 posted on 05/09/2014 9:25:25 AM PDT by Roman_War_Criminal (Bible Summary in a few verses: John 14:6, John 6:29, Romans 10:9-10)
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To: SeekAndFind

I will just have to wait the 5 years to find out. Maybe Pelosi could help.


48 posted on 05/09/2014 9:27:14 AM PDT by freekitty (Give me back my conservative vote; then find me a real conservative to vote for)
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To: Gamecock
My mom thinks that the bank is the safest place for her money.

My great aunt thought that it was her mattress. During the Depression she and her late husband had their life savings in a bank that FDR closed which never reopened.

Our family found a healthy five-figures in cash stashed in her place after she died.


49 posted on 05/09/2014 9:30:51 AM PDT by Buckeye McFrog
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To: SeekAndFind

Hopefully, the test isn’t written in cursive.


50 posted on 05/09/2014 9:31:36 AM PDT by Veggie Todd (The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. TJ)
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