Although overall financial literacy remains low, of those surveyed who received a D or F on the Financial Matters quiz, 88% reported wanting to know about their own personal finances, according to the study summary. When asked to rank the importance of understanding their own personal finances, nearly 8 in 10 respondents (79%) gave it a 7 or above on a scale of one (“what I don’t know won’t hurt me”) to 10 (“I feel the need to know all I can about my financial situation”), according to a press release.
The study found some basic financial concepts are well understood, including the definitions of diversification (88% answer correctly), asset allocation (79%) and dollar-cost averaging (57%). However, Americans fail to understand many key financial concepts. For example, only 35% know that the average rate of inflation is closer to 3% than 6% or 9%.
Permanent life insurance is among the most misunderstood financial products. Only one in four Americans realize that permanent life insurance can pay dividends (27%) and nearly twice as many (49%) incorrectly believe that term life insurance is more likely to have cash value than permanent life insurance.
Independent research firm Mathew Greenwald & Associates, Inc. conducted an online survey of 1,664 Americans ages 25 to 65 between June 1 – 9, 2010.
More about the study is here.You can take the Financial Matters quiz at http://financialmattersquiz.com/?win_type=formcalclarge.