How good is your financial literacy?
Answer a quick 5-question quiz to see how good your knowledge is compared to the rest of Australia
The HILDA Survey follows the lives of over 17,000 Australians each year, collecting information on many aspects of life, such as household and family relationships, income and employment, and health and education, which in turn can be used to inform public policy moving forward.
One of the areas of focus is the collection of information pertaining to the financial literacy of Australians.
This was undertaken via the provision of a 5-question quiz, which covered several key areas, i.e. numeracy, inflation, portfolio diversification, risk versus returns, and money illusion.
Less than 50% of those that completed the quiz were able to answer all five questions correctly. How good is your financial literacy? See how you go.
- Numeracy.
Suppose you put $100 into a no-fee savings account with a guaranteed interest rate of 2% per year. You don’t make any further payments into this account, and you don’t withdraw any money.
Question: How much would be in the account at the end of the first year, once the interest payment is made?
- Inflation.
Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year.
Question: After one year, would you be able to:
- buy more than today,
- exactly the same as today,
- less than today with the money in this account?
- Portfolio diversification.
Do you think that the following statement is true or false? “Buying shares in a single company usually provides a safer return than buying shares in a number of different companies.”
True or false?
- Risk versus returns.
Do you think the following statement is true or false: “An investment with a high return is likely to be high risk.”
True or false?
- Money illusion.
Suppose that by the year 2022 your income has doubled, but the prices of all of the things you buy have also doubled.
Question: In 2020, will you be able to buy:
- more than today
- exactly the same as today
- less than today with your income?
How did you think you went?
When it comes to achieving your financial goals and objectives, financial literacy plays a huge and important ongoing role. Financial literacy is a life skill that will help you to make sound financial decisions and ultimately achieve individual financial wellbeing.
That’s why we are delivering new stories every month with clear next steps to take and give you the ability to self assess yourself and how you are proceeding in your financial literacy journey.
Correct answers
- Numeracy. Answer = $102
- Inflation. Answer = Less
- Portfolio diversification. Answer = False
- Risk versus returns. Answer = True
- Money illusion. Answer = Exactly the same
Next Steps
- Explore the library for other stories of interest
- Make sure you always do the next steps provided