Only 14 percent of Americans correctly answered all five questions in a survey of financial literacy that was released May 30. Keep reading to the bottom of this article to see if you can do better.
The online survey of more than 25,000 adults found that although Americans may not be too smart about finance, they think they are. The FINRA Investor Education Foundation found that nearly three-quarters of respondents gave themselves high marks for financial literacy (5 to 7 on a 7-point scale).
Ignorance can be costly. “Financial literacy is found to be strongly correlated with behavior that is indicative of financial capability,” the report says. “Specifically, those with higher literacy are more likely to plan for retirement and to have an emergency fund, and less likely to engage in expensive credit card behaviors.”
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The FINRA Investor Education Foundation was partly funded with about $55 million in fines from a court-approved Securities and Exchange Commission settlement with Wall Street firms and two analysts, Jack Grubman and Henry Blodget, over charges that they issued biased recommendations to win investment banking business. It has also received money from other fines and from donations by FINRA, the securities industry’s self-regulatory organization, which was formed from the regulatory operations of the National Association of Securities Dealers and the New York Stock Exchange.
The good news from the survey is that Americans’ ability to make ends meet has improved somewhat since the first time the survey was conducted in 2009, while the economy was still in recession. The bad news: Most Americans still haven’t set up “rainy day” funds, and more than two in five credit-card holders “engage in costly behaviors” with their cards such as paying the monthly minimum, paying late fees, paying over-the-limit fees, and taking cash advances. As for financial literacy, it was highest among males, older respondents, whites, and Asians, those with higher income, and those with more education.
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