Over 40% of Americans Can’t Pass This Financial Literacy Quiz



I came across an article the other day showing that the United States does not finish in the top 10 when it comes to financial literacy.  In fact, over 40% of Americans failed the financial literacy quiz that you’ll see below.  


The United States is the country with the most millionaires (13.6 million in the US out of 33 million across the globe) and the most billionaires (565 in the US out of 2,043 worldwide).  But even with so many rich people in our midst, we still failed to make it into the top ten in terms of financial literacy.


I provided the financial literacy quiz below to see how you, the readers, would do.  Do you think you’ll perform better or worse than the average American?  Without further ado, go ahead and start!

  1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After 5 years, how much do you think you would have in the account if you left the money to grow:


  1. more than $102
  2. exactly $102
  3. less than $102
  4. do not know
  5. refuse to answer


  1. Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After 1 year, would you be able to buy:


  1. more than
  2. exactly the same as
  3. or less than today with the money in this account
  4. do not know
  5. refuse to answer


  1. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”


  1. true
  2. false
  3. do not know
  4. refuse to answer

First Question

If you answered A, you are correct.  You should have over $110 by this time, using compound interest.  This may seem simple, but only 67% of U.S. participants answered this question correctly.   


financial literacyThe first question is suppose to capture your capacity to do simple calculations with compounding interest.  

Albert Einstein called compound interest the eighth wonder of the world.  He said, “He who understands it, earns it, he who doesn’t, pays it.”


Second Question

If you answered C, you are correct.  With inflation rising at 2%, while your savings account rose at 1%, you would not be able to buy as much in the future as you did today.  75% of U.S. participants were able to answer the question correctly.


financial literacyThe second question is suppose to capture your understanding of inflation and the impact it has on money in the future.  

Former baseball player Sam Ewing once said, Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.”


Third Question

If you answered B, you are correct.  Having a diversified portfolio spreads out your risk in case one of the companies in your portfolio suddenly hits a difficult economic time.  Only 52% of U.S. participants were able to answer this question correctly.  Interestingly enough, over 34% either did not know or refused to answer.


financial literacyThe third question is a two-part test.  The first part is to understand if you know the difference between a stock and a stock mutual fund.  The other part is understanding the risk of the lack of diversification.  

Writer Brooke Astor once said, “Money is like manure; it should be spread around.”


Financial Literacy Rates around the Globe

I shared earlier that the United States doesn’t crack the top 10.  If you’re curious of the makeup of the top 10, here it is:


1,2,3. Denmark, Sweden, and Norway all tie for first place with a robust 71% financial literacy rate.  

4,5. Israel and Canada, 68% financial literacy rate.  

6. The United Kingdom, 67% financial literacy rate.  

7, 8. The Netherlands and Germany, 66% financial literacy rate.

9. Australia, 64% financial literacy rate.

10. Finland, 63% financial literacy rate.  


The United States financial literacy rate is currently at 57%.


A Real Problem

This is a huge problem.  Financial ignorance can have serious costs associated with it on our economy.  


If consumers don’t understand simple concepts like compounding interest, they can’t fully grasp in the impact of the purchases that they make with their credit cards.  Higher interest rates will compound the amount of money that they will owe to credit card companies.  


As an example, if you spend $1,000 on an item with a 19% interest rate, you can expect to pay 1.6% monthly interest, if you don’t pay that balance down.  Roughly, that is $16 extra every month, until you pay it off.  $16 may not seem like a lot.  However, if you have credit card debt of $10,000, paying $160 in interest each month is a whole lot more.


Study after study shows that people with strong financial skills are better savers for retirement.  They are more likely to diversify their risk to handle the ups and downs of the market.  In turn, they are better equipped to handle future financial situations.


While the U.S. has a long way to go to improve its financial literacy rate, I am trying to do my part to help people become more financially literate.


So readers, how did you do on the quiz?  Are you sharing your financial literacy with your friends and family?  Share your thoughts below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.


  1. Seems like the biggest failure is in the last question which makes sense based on another survey I read lately. It basically stated that participating in the stock market is still very low compared to pre-2008 habits.
    Maybe people are still second guessing themselves or believe it is too much to figure out and are afraid to do anything.
    Budget on a Stick recently posted…My FIRE Prowess ScoreMy Profile

    • Thanks for sharing Budget on a stick!!! I have heard that as well. Too many people are staying away from the market and missing out on the gains, which is really too bad.

  2. I wonder if those other countries teach anything about money in school? I believe that is one of the biggest failures of our school system. I had one Econ class in college and none in high school. Luckily I decided I better start educating myself once I got a real job.
    Grant @ Life Prep Couple recently posted…The Only Job I Ever LovedMy Profile

  3. Sadly unsurprising…it’s surprising how many professionals and extremely well-educated folks fail to understand basic financial literacy.

    Bonus question: how many major stocks would you need before you’re barely adding anything to your diversification return (i.e. tiny fractions of the last percentile)?
    Mr. FWP recently posted…From Homeless to Hopeful in One YearMy Profile

  4. This is an interesting quiz. I have to admit I have never seen or taken it before. Questions 2-3 seem self-explanatory.

    It’s a bid sad that so many people can’t pass it. I wonder if it has to do with the lack of personal finance literacy at school and at home.

  5. Unfortunately finances are primary learned and observed in the home. This is hard when you grow up in a family who doesn’t talk much about money. You either figure it out on your own or go clueless. But as you are figuring it out you waste valuable time.
    Turning Point Money recently posted…Leave Early Retirement, Already?My Profile

  6. I tried to share as much financial knowledge as possible with my family and friends. However, I feel that most people are reluctant or uncomfortable talking about finance.

    Another huge issue that I noticed about handling personal finance was discipline. It’s so easy for people to say that I am still young and will start saving for tomorrow, tomorrow. The reality is, people don’t start until someone major event happened to them.

    My view is, today is the best day to start saving for anything. The earlier you start, the faster you will get there.
    Leo T. Ly @ isaved5k.com recently posted…Basic Investment ConceptsMy Profile

    • I definitely agree with Leo!!! At the end of the day it’s a discipline issue. If you can be patient to save for tomorrow instead of spend for today. The chances are you’ll do pretty well.

  7. The countries with high scores don’t surprise me too much. I’ve read that those European countries are also where the general population is the happiest in comparison with the rest of the world. I’m wondering if since they are so knowledgeable about personal finance, it leads to smarter decisions and as a result more less stress about money and more happiness via enjoying life 🙂
    SMM recently posted…Simple Fund Comparison – SCHD VS VIGMy Profile

  8. Doesn’t surprise me and I agree with others that the concepts of finance should be taught, but I don’t know that it will help. People need to want to learn about it. If people don;t want to learn, talk, or discuss money, they will just go through the motion to pass the class. Very Scary!
    fibythecommonguy recently posted…Net Worth Update #4 – July ’17My Profile

  9. I’m super competitive, so of course I took this quiz and did all right. 🙂 I’m not the math brain in the house, so it takes me some finger-counting to get to the right answers lol. I do wish we’d have personal finance education in schools. It’s sad that so many of us are poorly educated about money, an important foundation for our lives.
    Mrs. Picky Pincher recently posted…What A Frugal Weekend! August 20My Profile

    • I figure if they can make us take Geometry it would make sense to teach personal finance at some point in school. I said Geometry because I hated that class most in high school. That wasn’t math to me 🙂

  10. Took the quiz, got all right. No surprise. This quiz is basic financial literacy. As a person on an FI journey, we all should have 100% on this quiz.
    i try to pass my knowledge first to my close family, and then to friends. Via the blog, I share with who ever wants to read it.

    • That’s funny that it’s such a popular topic. I had no idea so many people were talking about this right now. Sounds like we’re all on the same wave length.

  11. Just want to throw it out there that I aced the quiz haha Honestly though, I’m not really surprised that some of the rates are so low in certain states. It is sad, but many people to not take the time to learn these basic financial concepts nor are they required to be taught to individuals. So this is knowledge that you have to seek out. I’m happy to be in this community and I know that this is what we love so of course this seems like common sense to us. But I also have to remember that there are so many others that we need to try and teach about these topics to help expand their basic knowledge about personal finances. 57% is a pretty low bar to cross, so let’s work and do everything we can to increase it one percentage point at a time.


    Dividend Diplomats recently posted…Lanny’s Recent Stock Purchase – Delta Airlines (DAL)My Profile

    • Congrats Bert on passing!!! I have to admit when I first took it I was a bit nervous. I definitely didn’t want to fail 🙂 But I agree I was surprised how many people did poorly.

    • I agree!!! Three simple questions was all that the quiz was made up of. I definitely agree that people need more education in this area to understand these simple yet profound steps.

  12. I work with a lot of brilliant people… who have absolutely no idea how to manage their finances. It’s just nuts how we’re not taught any of this in school. There are plenty of resources for people to learn on their own, but it’s hard if you’re not brought up to think about it. That’s why I’ve grown to learn that a good financial education starts at home. I hope I’m a good teacher for my kids…
    Passive Income M.D. recently posted…Journal Club 8-19-17My Profile

    • I definitely agree!!! Personal Finance is definitely not as entertaining as other subjects. I honestly wish someone would do a reality TV show on Warren Buffett. I think it would do fairly well 🙂

  13. Wow, we aren’t even in the top 10?!? I guess I’m not really surprised, but it is disappointing.

    I passed, but I can see where without the financial basics, not many will. Definitely motivation to share the knowledge (esp. as we raise our family!)

  14. Here, here. That is why I became, on top of my other duties, a certified financial education instructor to provide some aspects of financial literacy. I just now have to figure out how to offer some courses.

  15. It’s sad that the passing rates for this quiz are so low, especially in the US. One of the drivers behind that is that finance is not properly taught in high school or even college. With finance or at least aspects of it effect all of us, you would think it would be a bigger focal point in the curriculum that our kids learn. I think the earlier we start teaching financial literacy the better!

    • I definitely agree!!! I would think that personal finance would be a bigger requirement than Geometry 🙂 But I do dislike really Geometry and the classes that I sat through.

  16. It is a huge problem in the US for sure. It doesn’t help that basic personal finance skills are not taught in schools. Most is learned by your own mistakes or through watching your parents. But so many people are riddled with debt, learning from others is not always a smart decision. Glad to say I passed this with flying colors. Would be worried if I didn’t haha. Fun exercise.
    Dividend Daze recently posted…Real Estate vs Dividends – What is better for Retirement Income?My Profile

    • It’s too bad that so many people have to learn from their mistakes instead of getting educated ahead of time. Maybe one day we’ll teach basic personal finance in the schools 🙂

  17. Dang that sucks, the US is not in the top 10 and our financial literacy rate is just over half. Need to put more awareness on understanding our own finances so more can have basic knowledge of their finances. At the same time the US is always promoting to spend and little on saving.

    • Very true!! The US is based on a consumer driven economy. I’d be interested to know what would happen if people started to save more. I just might have to look into that 🙂

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