Can you answer these six basic financial questions?
Most people answer only two questions correctly. Let’s see how well you do.
Basic Financial Literacy Questions
These six questions on credit history, net worth, interest rates and student loans were developed by Annamaria Lusardi, Director of the Global Financial Literacy Excellence Center (GFLEC) at The George Washington University. They were included as part of a survey conducted by education company, EVERFI, which found in prior research that on average, respondents only answered two of the six questions correctly.
1. As a general rule, how many months’ expenses do financial planners recommend that you set aside in an emergency fund?
- a) 1 to 3 months
- b) 3 to 6 months
- c) 6 to 12 months
- d) 12 to 15 months
Correct Answer: The correct answer is C, which is “6 to 12 months.”
% Correct: 14% of respondents answered this question correctly.
Advice: According to a recent survey, 23% of respondents say they put 0% of their monthly paycheck toward savings. Whether it’s an unforeseen medical expense, home repair or unemployment, you never know when an emergency will strike. Put aside at least six months (and preferably more) of funds in a separate savings account to save for a rainy day. Even if you can’t do this now, save as much as you can each month.
2. If you have too many credit cards, what should you do?
- a) close as many as possible
- b) request a higher credit limit
- c) be cautious about closing credit cards
- d) close the cards with the lowest balances
Correct Answer: The correct answer is C, which is “be cautious about closing credit cards.”
% Correct: 29% of respondents answered this question correctly.
Advice: If you have no credit card debt, it’s not necessarily a bad thing to have multiple credit cards. More credit can help improve your credit utilization, which is how much credit you spend relative to the amount of credit you have. The lower your credit utilization, the better.