Only 1 out of 10 Adults Got This Personal Finance Quiz 100% Right [Survey Insights]

Adulting is hard

Chances are, when you graduated from school, you were not prepared for the working world nor handling your personal finance.

Out of curiosity, the fundMyLife team went out to conduct a classic personal finance quiz that tests financial literacy. Standard & Poor’s, Gallup, World Bank, and George Washington University created this quiz, and conducted it on 150,000 people. Composed of five questions, this quiz tests basic concepts such as interest rates, investments, inflation, etc. Surprisingly, only 1/3 of the world passed this test. We quizzed people in places like Orchard Road and Ang Mo Kio to see how financially well-informed people were. You can take the quiz here too: https://goo.gl/forms/pHJv64Zead4b1Ci73

Personal Finance Quiz Results

Question 1: Suppose you have some money. Is it safer to put your money into one business or investment, or into multiple businesses or investments?

What it tests: risk diversification.

Personal finance quiz result 1: Piechart shows that 57.5% said to invest in multiple businesses or investments and 42.5% says to invest in only one
Results from the first question on risk diversification

Correct answer: multiple businesses or investments.

Reason: As the popular saying goes, it’s not good to put all your eggs in one basket lest that basket falls and breaks all your eggs. Intuitively speaking, if you spread your money across different businesses or investments you’d have more buffer against badly performing businesses or investments.

Question 2: Suppose over the next 10 years the prices of the things you buy double. If your income also doubles, will you be able to buy less than you can buy today, the same as you can buy today, or more than you can buy today?

What it tests: understanding of inflation

Piechart showing three different percentages

Correct answer: the same as you can buy today.

Reason: Surprise, surprise! Why is this so? Assuming you earn $10 today, and that bread you love costs $10 as well. It goes that you can (unfortunately) only buy one. Ten years on, for the same work you earned $20. However, the cost of that bread you love doubled as well to $20. That means, you’d still only be able to buy one of that bread. Such is inflation.

Question 3: Suppose you need to borrow $100. Which is the lower amount to pay back: $105 or $100 + 3% interest?

What it tests: understanding simple interest rate.

55% of those surveyed answered correctly while 45% answered wrongly

Correct answer: $100 + 3%

Reason: $100 + 3% = $103…which is less than $105.

Question 4: Suppose you put money in the bank for two years and the bank agrees to add 15% per year to your account. Will the bank:

  1. Add more money to your account the second year that it did the first year
  2. Add the same amount of money both years

What it tests: understanding of compound interest

Piechart showing the results. Majority of the ones surveyed answered correctly.

Correct answer: more money

Reason: As the urban legend goes, Albert Einstein is said to have declared compound interest as one of the world’s greatest inventions. While the story sounds a bit unreal, the power of compound interest is anything but. It is the force behind both struggling credit card owners and successful investors.

Question 5: Suppose you had 100 dollars in a savings account and the bank adds 10 percent per year to the account. How much money would you have in the account after five years if you did not remove any money from the account?

What it tests: understanding of compound interest

Results show an interesting mix of different answers to question 5 - 65% said more than $150, 17.5% exactly $150, and 17.5% less than $150

Correct answer: more than 150 dollars

Reason: In the first year, you’d get $10 (10%) for a total of $110, and in the second you’d get $11.10 (10% of $110) for a total of $121.10. At the end of five years, you’d have $161.50 at the end of five years.

That’s all folks! I hope you all got 5/5 for this.

The results of this personal finance quiz is more or less consistent with what’s published in the recent years regarding Singaporeans’ level of financial literacy. We understand that it’s quite daunting to figure things out by yourself so why not get hassle-free financial advice from our pool of curated FAs on fundMyLife!

Don’t worry if you found the personal finance quiz a little too hard for your liking. We will be conducting a simple workshop on financial literacy soon so like us on our Facebook page!

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