In Discussions, Money

How financially savvy are you?

Think you know money? Let’s see if you do.

Take this quick quiz and report back on your score! The questions are general enough for anyone to answer, but are obviously geared towards Canadians (e.g. Bank of Canada..)

If anyone is interested in the information behind each answer, let me know in the comments and I’ll do a follow-up debrief of the why behind each question.

1. If the inflation rate is 5% and the interest rate you get on your savings is 3%, will your savings have at least as much buying power in a year’s time?
a) Yes
b) No

2. A credit report is… ?
a) A list of your financial assets and liabilities
b) A monthly credit card statement
c) A loan and bill payment history
d) A credit line with a financial institution

3. Who insures your stocks in the stock market?
a) The National Deposit Insurance Corporation
b) The Securities and Exchange Commission
c) The Bank of Canada
d) No one

4. True or false… By using unit pricing at the grocery store, you can easily compare the cost of any brand and any package size.
a) True
b) False

5. If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?
a) A young single woman with two young children
b) A young single woman without children
c) An elderly retired man, with a wife who is also retired
d) A young married man without children

6. If you had a savings account at a bank, which of the following statements would be correct concerning the interest rate that you would earn on this account?
a) Sales tax may be charged on the interest that you earn
b) You cannot earn interest until you pass your 18th birthday
c) Earnings from savings account interest may not be taxed
d) Income tax may be charged on the interest if your income is high enough

7. Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that lasts several years?
a) Young working couples with no children
b) Young working couples with children
c) Older working couples saving for retirement
d) Older people living on fixed retirement income

8. Lindsay has saved $12,000 for her university expenses by working part-time. Her plan is to start university next year and she needs all of the money she saved. Which of the following is the safest place for her university money?
a) Corporate bonds
b) Mutual Funds
c) A bank savings account
d) Locked in a safe at home
e) Stocks


9. Which of the following types of investment would best protect the purchasing power of a family’s savings in the event of a sudden increase in inflation?
a) A twenty-five year corporate bond
b) A house financed with a fixed-rate mortgage
c) A 10-year bond issued by a corporation
d) A certificate of deposit at a bank

10. Under which of the following circumstances would it be financially beneficial to borrow money to buy something now and repay it with future income?
a) When something goes on sale
b) When the interest on the loan is greater than the interest obtained from a savings account
c) When buying something on credit allows someone to get a much better paying job
d) It is always more beneficial to borrow money to buy something now and repay it with future income

11. Which of the following statements is not correct about most ATM (Automated Teller Machine) cards?
a) You can get cash anywhere in the world with no fee
b) You must have a bank account to have an ATM card
c) You can generally get cash 24 hours-a-day
d) You can generally obtain information concerning your bank balance at an ATM machine

12. Which of the following can hurt your credit rating?
a) Making late payments on loans and debts
b) Staying in one job too long
c) Living in the same location too long
d) Using your credit card frequently for purchases

13. What can affect the amount of interest that you would pay on a loan?
a) Your credit rating
b) How much you borrow
c) How long you take to repay the loan
d) All of the above

14. Which of the following will help lower the cost of a house?
a) Paying off the mortgage over a long period of time
b) Agreeing to pay the current rate of interest on the mortgage for as many years as possible
c) Making a larger down payment at the time of purchase
d) Making a smaller down payment at the time of purchase

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ANSWER KEY (YOU’RE NOT CHEATING RIGHT?)

1. If the inflation rate is 5% and the interest rate you get on your savings is 3%, will your savings have at least as much buying power in a year’s time?
a) Yes
b) No

2. A credit report is… ?
a) A list of your financial assets and liabilities
b) A monthly credit card statement
c) A loan and bill payment history
d) A credit line with a financial institution

3. Who insures your stocks in the stock market?
a) The National Deposit Insurance Corporation
b) The Securities and Exchange Commission
c) The Bank of Canada
d) No one

4. True or false… By using unit pricing at the grocery store, you can easily compare the cost of any brand and any package size.
a) True
b) False

5. If each of the following persons had the same amount of take home pay, who would need the greatest amount of life insurance?
a) A young single woman with two young children
b) A young single woman without children
c) An elderly retired man, with a wife who is also retired
d) A young married man without children

6. If you had a savings account at a bank, which of the following statements would be correct concerning the interest rate that you would earn on this account?
a) Sales tax may be charged on the interest that you earn
b) You cannot earn interest until you pass your 18th birthday
c) Earnings from savings account interest may not be taxed
d) Income tax may be charged on the interest if your income is high enough

7. Inflation can cause difficulty in many ways. Which group would have the greatest problem during periods of high inflation that lasts several years?
a) Young working couples with no children
b) Young working couples with children
c) Older working couples saving for retirement
d) Older people living on fixed retirement income

8. Lindsay has saved $12,000 for her university expenses by working part-time. Her plan is to start university next year and she needs all of the money she saved. Which of the following is the safest place for her university money?
a) Corporate bonds
b) Mutual Funds
c) A bank savings account
d) Locked in a safe at home
e) Stocks

9. Which of the following types of investment would best protect the purchasing power of a family’s savings in the event of a sudden increase in inflation?
a) A twenty-five year corporate bond
b) A house financed with a fixed-rate mortgage
c) A 10-year bond issued by a corporation
d) A certificate of deposit at a bank

10. Under which of the following circumstances would it be financially beneficial to borrow money to buy something now and repay it with future income?
a) When something goes on sale
b) When the interest on the loan is greater than the interest obtained from a savings account
c) When buying something on credit allows someone to get a much better paying job
d) It is always more beneficial to borrow money to buy something now and repay it with future income

11. Which of the following statements is not correct about most ATM (Automated Teller Machine) cards?
a) You can get cash anywhere in the world with no fee
b) You must have a bank account to have an ATM card
c) You can generally get cash 24 hours-a-day
d) You can generally obtain information concerning your bank balance at an ATM machine

12. Which of the following can hurt your credit rating?
a) Making late payments on loans and debts
b) Staying in one job too long
c) Living in the same location too long
d) Using your credit card frequently for purchases

13. What can affect the amount of interest that you would pay on a loan?
a) Your credit rating
b) How much you borrow
c) How long you take to repay the loan
d) All of the above

14. Which of the following will help lower the cost of a house?
a) Paying off the mortgage over a long period of time
b) Agreeing to pay the current rate of interest on the mortgage for as many years as possible
c) Making a larger down payment at the time of purchase
d) Making a smaller down payment at the time of purchase

FIELD NOTES

If you got 100% of them right, you are in the 26% of people who did.

They are easy, but NOT really easy questions if you know what I mean.


You’d have to understand inflation, debt, credit and how interest works, and if you had a good, solid understanding of that, it could be easy to nail this test.

If anyone is curious about the info behind each answer, shoot me a comment and let me know. I’ll do a debrief.

The #1 question that most people got right at 87% was:

12. Which of the following can hurt your credit rating?
a) Making late payments on loans and debts
b) Staying in one job too long
c) Living in the same location too long
d) Using your credit card frequently for purchases

Predictably, if you go by household debt, those with MORE debt got this question right (I would hope so)…

  • 77% of People without debt got this question right
  • 90% of People with under $50K in debt got this question right
  • 93% of People with $50K – $250K in debt got this question right
  • 92% of People with over $250K in debt got this question right

The #1 question that most people got wrong (only 26% got it!) was:

Those without any debt at all, got tripped up by this one:

10. Under which of the following circumstances would it be financially beneficial to borrow money to buy something now and repay it with future income?
a) When something goes on sale
b) When the interest on the loan is greater than the interest obtained from a savings account
c) When buying something on credit allows someone to get a much better paying job
d) It is always more beneficial to borrow money to buy something now and repay it with future income

If you looked at who got it right by household debt, it looks like this:

  • 19% of People without debt got this question right
  • 27% of People with under $50K in debt got this question right
  • 32% of People with $50K – $149K in debt got this question right
  • 31% of People with $150K – $250K in debt got this question right
  • 29% of People with over $250K in debt got this question right

Not many people are “very knowledgeable” about money…

It stands to reason. On average, only about 6% of people feel “very knowledgeable” about money.

Interestingly, this number goes up to 9% for people with over $250,000 in debt. I guess the more debt you have, the more you learn about it (possibly to get out of it or to get more of it!)

Or maybe the ones who are majorly in debt are also the ones who are making shedloads of money (need proven income to borrow big amounts of money), and as a result, they know more about it, perhaps working in the financial industry itself.

Most people (almost half at 46%) consider themselves “fairly knowledgeable” about money…

..which is only one rung above “Not very knowledgeable”.

Basically most people don’t know much about money which is a shame because it’s their money.

Who has absolutely no debt whatsoever by age?

Only 5% of people have no consumer debt or a mortgage (ourselves included because we paid for our house in cash, and happily, my parents included as well).

Specifically?

  • Under the age of 45 only 5% have zero debts
  • Age 45 – 64, only 4% have zero debts
  • Age 65+, only 5% have zero debts

Wow. I guess even in retirement, I would always have aimed to not have any debt at all (what a stressor), but there are still 95% of people who have some form of consumer debt well into their 60s.

How about renters?

On average, 5% of all renters are completely consumer debt free (obviously they don’t have a mortgage).

The numbers look somewhat better for renters than owners.

Specifically, renters…

  • Under the age of 45 only 4% have zero consumer debts
  • Age 45 – 64, only 8% have zero consumer debts
  • Age 65+, only 8% have zero consumer debts

Okay, how about people who own a home and have a mortgage? What’s their consumer debt load?

On average, 23%! DING DING DING!

Almost 1/4 of people with mortgages, do not have any consumer debt at all.

Specifically?

  • Under the age of 45 only 19% have zero consumer debts
  • Age 45 – 64, only 26% have zero consumer debts
  • Age 65+, only 39% have zero consumer debts

Way to go!

I guess if your mortgage is your biggest debt and it sucks up your money, you’re way more cautious about not having any other unnecessary debts, right?

Stands to reason. 🙂

WHERE TO START TAKING CHARGE OF YOUR MONEY

So, how did you do? 🙂

(I got 14/14.)

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Sherry of Save. Spend. Splurge.

Am my own Sugar Daddy. Am a millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I have 11 side incomes that are on track in 2020 to make me $50K - $75K. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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6 Comments

  1. Tim

    14/14…if I got lower would I have to give up my PF blog? 😉

    I agree this was a good test as you did have to understand the concepts in order to solve the problems.

    Reply
    1. Sherry of Save. Spend. Splurge.

      Yes, we’d revoke your PF card.

      I rather like this quiz because it is quite in-depth and yet not asking about things that are too specific like how bonds work.

      Reply
  2. Dayle

    I got 13/14 — also got #9 wrong!

    Reply
    1. Sherry of Save. Spend. Splurge.

      Hmm, tricky one that #9.. I do say I had to really think about it, myself and think through each scenario.

      Reply
  3. Roberta

    Question 6 was half correct: Put in (d), but not (c); Question 9 I had wrong; otherwise, I had all the answers for the other twelve (12) questions. Enjoyed the quiz.

    Reply

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——

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