Most Americans couldn't pass this financial literacy test. Can you?
From understanding inflation to how compound interest works, many consumers struggle with the financial basics. That's according to preliminary findings from a recent survey of more than 25,000 American consumers who were quizzed on their financial know-how by the FINRA Investor Education Foundation.
The nonprofit has conducted the study every three years since 2009. FINRA stands for Financial Industry Regulatory Authority, an organization that oversees brokerage firms.
Testing your financial literacy
Overall, less than a third of respondents answered at least five of the seven questions correctly. The findings released this month mirror the results of quiz-takers in Pennsylvania, New Jersey and Delaware, where between 27% and 29% correctly answered at least five questions.
One area of improvement? Notably, the group found consumers' knowledge about inflation has increased, with nearly 60% of quiz-takers overall answering the following question correctly, compared with 53% in 2021:
Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
- More than today
- Exactly the same
- Less than today
- Don't know
The correct answer is less than today.
Gary Mottola, the FINRA Foundation's research director, said that an improved understanding of inflation likely reflects the lived experiences of many over the past few years.
"People have had to live with inflation and read about it, and for young adults, this is probably the first time in their lives that they've encountered it," he said. "People now seem to have a more intuitive understanding of inflation."
You can click here to take the financial knowledge quiz yourself.
Meanwhile, this question on compound interest managed to stump 71% of quiz-takers:
Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year, compounded annually. If you didn't pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
- Less than 2 years
- 2 to 4 years
- 5 to 9 years
- 10 or more years
- Don't know
The correct answer is 2 to 4 years.
"Generally speaking, financial knowledge in the United States is on the low side, but there are some pockets of the country that are doing a little bit better," Mottola said. "There's a big opportunity here to make financial education a priority and give people the knowledge, skills and tools they need to make sound financial decisions throughout life."
Pushing for better education
If there's one thing most Americans can agree on, it's that financial literacy should be taught in high school. A whopping 87% of respondents said as much in a recently published American Bankers Association Foundation survey.
Many of those consumers (72%) believe they'd be better off financially had they learned the basics of personal finance at an earlier age.
It comes as Pennsylvania joins at least 25 other states that have enacted high school personal finance requirements.
Starting in the 2026-27 school year, Pennsylvania high schools must provide a financial literacy course that students will have to take to graduate.
Similar requirements vary by district in New Jersey and Delaware, according to Next Gen, a nonprofit that advocates for personal finance education.
Studies show requiring financial education improves credit scores, lowers loan delinquency rates and reduces the likelihood of falling behind on credit card payments.
Do you have a money question, a consumer issue, or a scam story you want to share? Email InYourCorner@cbs.com
