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Wednesday, November 18, 2015

Americans Flunk Financial Literacy Test

The U.S. May Be the World's Richest Country, But It Ranks 14th in Financial Literacy has this unsurprising but disturbing news:

"By many measures, the U.S. is the world’s wealthiest country—but it’s not because Americans are the best with their finances.

In fact, a sprawling global survey of financial literacy around the world finds that the U.S. ranks 14th, behind Singapore and the Czech Republic. . . .

To gauge financial literacy, and capture whether adults know how to make sound decisions, the researchers asked questions on four basic personal finance topics: inflation, interest, compounding and financial diversification. Anyone providing correct answers to three of the four topics was rated as financially literate.

Only 57% of Americans notched a passing grade, compared with over 70% in Norway, Denmark and Sweden, and over 60% in Israel, Canada, the U.K., the Netherlands, Germany, Australia, Finland and New Zealand. . . .

The survey data showed a financial literacy gender gap in most countries around the world: About 35% of men and 30% of women, globally, passed the test.

The data also uncovered a new pattern: In most developed countries, including the U.S., young people have lower financial literacy scores than middle-aged people. This pattern, however, is reversed in the developing world, as in China. Although the country’s overall scores are lower, China’s youngest adults have higher scores than middle-aged adults. So while China remains much less financially literate than the U.S., each generation is getting savvier. In Hong Kong, young people are slightly more financially literate than young Americans, even as the older Hong Kong generations have far lower literacy than Americans of the same age.

(While overall, Americans rank 14th, the generation of Americans age 15-34—broadly speaking the generation known as millennials—ranks 21st.)
Despite a seemingly obvious link between financial literacy and economic outcomes, researchers have had a difficult time proving that consumers can be made more financially literate through education. . . . it could be bad news for the currently wealthy countries with such low financial literacy."

Summing Up

To take the short and simple test, just click on the link below. 

I'm sure you will get 100. If so, that will make you wonder, as I do, why half of our fellow Americans can't pass the test by getting even 3 of the 5 questions answered correctly.

And it will cause you to wonder even more how they will be able to take care of themselves and their families with respect to basic financial matters in adulthood.

At least it does me.

Thanks. Bob.

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