A new survey found that most Americans were not able to pass a quiz on financial literacy that had just seven questions. The Financial Industry Regulatory Authority (FINRA) recently conducted one of its National Financial Capability Studies, which tracked financial literacy among 25,500 adults across the country. The study included a Financial Knowledge Quiz featuring questions on topics such as interest rates, inflation, mortgages, and investing.
“The findings indicate wide differences in financial knowledge across the country,” FINRA shared. Several of the quiz’s seven questions seemed to stump most respondents. Only 58% of the quiz’s respondents answered the second question correctly, which asked about the impact of inflation on purchasing power.
Results were even more abysmal for the third question, which only a quarter of respondents answered correctly. This question focused on the relationship between interest rates and bond prices. FINRA also compared results between states, considering the percentage of people who got at least five of the quiz’s seven questions correct.
Minnesota came in at the top of the list, with 34.8% of quiz respondents answering at least five questions correctly. They were followed by Wisconsin at 34.5% and the District of Columbia at 34.4%.
Quiz reveals gaps in financial knowledge
As for the states that scored the lowest, Louisiana ranked the worst with 18.1% of people answering at least five questions correctly. Following Louisiana were Mississippi at 19.2% and Alabama at 20.2%. Experts were understandably concerned about the lack of financial literacy displayed by quiz-takers.
Investopedia’s editor-in-chief, Caleb Silver, attempted to explain why people scored so poorly on the quiz overall. “I think it’s a lack of being able to connect the dots between economic forces like inflation and how they apply to our everyday lives,” he said. “I take this all the way back to what we’re taught in high school or what we’re not taught.”
One thing the quiz made clear was that Americans do not have a solid grasp on interest rates.
Gary Mottola, research director at the FINRA Foundation, said this can be problematic because it can lead to complications through compounding interest. Gerri Walsh, the president of the FINRA Foundation, stated, “Overall, the findings show that knowledge of everyday financial concepts remains a challenge for many Americans.”
There is a push to make financial literacy a priority for schools. USA Today noted that 27 states now have personal finance courses in high schools, compared to just 11 in 2021.
Despite this increase, only 15% of respondents to an American Bankers Association Foundation poll said that they felt like school was where they learned about finance. Young adults need to be prepared to take the next steps in their lives towards financial independence with confidence. While teaching personal finance may not be a large priority now, based on the results of this quiz, it’s clear that it should become one.
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