Almost two thirds of Americans today can’t pass a basic financial literacy test. Can you?
According to the FINRA Foundation’s National Capability Study, most Americans only got three out of six answers correct on a financial quiz… only 50%!
FINRA (Financial Industry Regulatory Authority) is an organization dedicated to, among other things, protecting investors from investment fraud. It regulates stock brokers and brokerage companies, and works to create transparency in the marketplace. So it is especially interesting that FINRA reports that the majority of Americans are financially illiterate.
Why does financial literacy matter?
Imagine that you’re going to play a game of chess. What would happen if you had no idea what each piece was or how it moved, let alone the rules? You certainly wouldn’t be able to play. Your opponent could easily take advantage of your ignorance at every turn.
In the same way, you aren’t going to get very far in the world of investing without sufficient knowledge of financial concepts. You can easily fall prey to scams or make uninformed decisions that can have serious ramifications. This is why financial education and literacy are extremely important, no matter your age or size of your bank account.
Test your financial literacy
How does your financial knowledge compare to that of the average American? Take FINRA’s five-question quiz to check your financial literacy now.
Do America’s poor financial literacy scores mean that FINRA should tighten its regulations (in efforts to protect the innocent investor), or should organizations (the government?) provide more financial education?
Financial education doesn’t have to be confined to the classroom. You can also get a financial education in your own home, as you balance your checkbook or read Rich As A King. A visit to the supermarket can be a great educational opportunity for teaching your children about unit cost and sales. You can even derive some financial education from a “date night,” when you discuss whether a certain form of entertainment fits into your budget.
Take your financial education into your own hands and make sure that you are among those Americans who are financially literate.
Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You A Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial Planner (CFP®).