Ahh Disagree... Ahh cans read it if it's not written in cursive.
Posted on 08/30/2014 10:09:19 AM PDT by SeekAndFind
“The college educated are more likely to own stocks and less prone to use high-cost borrowing.” — Journal of Economic Literature
Financial literacy is important, but sadly, only a handful of states require students to take personal finance or an investment course. I earned a Ph. D. in economics and never took a class in accounting, business or personal finance!
How bad is financial education in this country?
In 2008, two economists came up with three simple questions to test the financial knowledge of citizens 55 years or older. See how well you do:
1. Suppose 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. More than $102.
B. Exactly $102.
C. Less than $102.
D. I do not know.
2. Imagine that the interest rate on your savings account was 1 percent per year and price inflation was 2 percent per year. After 1 year, would you be able to buy:
A. More than today with money in this account.
B. Exactly the same amount as with the money in this account.
C. Less than today with the money in this account.
D. I do not know.
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. I do not know.
(Excerpt) Read more at finance.townhall.com ...
This does look like a quiz for total economic illiterates. It doesn't even acknowledge that a person should know it's "more than $110" for number 1. In fact, it doesn't discern who actually knows something about how money works.
PS: Schools at every level through HS don't teach money management or economics any more.
Since with most people $100 is their maximum savings and they don't pay taxes the correct answer stands.
You can't answer a question correctly if you can't read it.
RE: How many times have financial advisors, bankers etc tried to tell you you’re better off with mutual funds than you are being informed and making your own decisions?
Actually the key words in the question #3 are “usually” and “safer” and “ONE company stock”.
It goes without saying that had you bought APPLE in the 80’s, you’d be a millionaire now, but how would you know then?
What if you worked with say Bear Sterns and put all of your money in that one company’s stock? Of course you wouldn’t know then what would happen to it. You’d be congratulating yourself up to 2006 and then thinking of jumping out of a building by 2008.
It’s always easy to look at things in hindsight.
So I still agree with the question, a diversified portfolio of stock is USUALLY safer than buying just ONE company stock.
RE: Since with most people $100 is their maximum savings and they don’t pay taxes the correct answer stands.
As long as inflation is less than 2%. But is that really true?
People never, ever factor in taxes AND inflation. THAT is the problem. These are the two enemies of future income.
And yes, THEY SHOULD BE TEACHING THESE IN SCHOOL AS EARLY AS POSSIBLE.
Fair enough. I suppose the sarcasm was not apparent?
The fact that these people, with 30+ years of living, failed 65% of the time to properly answer these questions is why Obama won! They are the Low Information Voters who cannot be bothered and trust AARP and the Democrats to guide them to their individual death panels. Sheesh!
Note that the states have never amended the Constitution to prohibit the states from requiring candidate voters to answer the referenced questions correctly before being allowed to vote.
I think that a basic knowledge voter qualification test should also include simple questions about the federal government's constitutionally limited powers and associated limited power to lay taxes.
Americans are just following the example of our fine leaders. Spend more money than you have and borrow money that you can’t pay back.
LOL!!
But the question was do you have more than $102. If the question was "if the inflation rate is 2% or more during that period do you have more buying power?", then the answer would be no. Answer the question as asked.
P.S. Why would I compute my interest? That's the bank's job.
Strangely, in spite of my professor father’s ridicule of the discipline of industrial engineering, I believe Engineering Econ was one of the most valuable classes I took.
Yet every single one of these ignoramuses considers himself an expert on economics and government policy re economics.
As was with my sarcastic response. We were both dealing in reality.
The fees I watch....particularly any account that charges a ridiculous monthly fee if you don't keep a rather high balance.
I responded to a proposal the other day in the most basic terms I could think of, I’m trying to improve my communication skills. I said, “that won’t work out. The goesinta hand has less than the goesouto hand.”
Blank stare response.
However, the correct answers are still A and C.
If you live in a no-tax state, the top rate on interest income is 43.4% (39.6% plus the 3.8% tax levied by the ACA, which unconstitutionally originated in the Senate). So, without taxes, your $100 would grow to $110.40 in five years. But at the top federal rate, only to $105.77.
As for inflation, that's just a hidden tax, levied by mismanaging the currency, as opposed to directly via the tax code.
This test is very flawed, or at least the reporting of it is flawed.
The only thing it tells us about the sample is that the people questioned were 55 years or older.
Based on this information, the following might be true: four people were asked these questions. All of them were over 85-years-old. Three of them had Alzheimers and were unable to understand the questions. The fourth had only 4 years of primary education and was unable to read the questions.
Without more information, the results of this test are completely useless for forming any opinion of the financial literacy of American people.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.