Spencer Feingold
May 17, 2024
This video is part of: Centre for Financial and Monetary Systems
To assess individuals' understanding of financial concepts, economists Annamaria Lusardi and Olivia Mitchell have designed a simple test consisting of three questions. So far, it has been found, fewer than 1 in 3 US adults can answer all these questions correctly.
The three questions devised by the economists are related to the concepts of interest, inflation and risk and diversification. The questions are as follows:
Financial literacy means feeling equipped to make financial decisions that impact your future comfort. People with a low understanding of risk are twice as likely to be strapped with debt, lack emergency savings, and worry about retirement income compared to those who understand risk.
Experts recommend incorporating risk literacy into financial education programs taught in high schools and colleges. Teachers can use tools and stories to simplify the topic for students.
So, how many questions did you answer correctly?
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