My latest Star Tribune column:
Do you know the answer to the following three personal finance questions? I came across them the other day while doing some research.
Question 1: Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow? A) More than $102. B) Exactly $102. C) Less than $102. D) Do not know/Refuse to answer.
Question 2: Imagine that the interest rate on your savings account was 1 percent per year and inflation was 2 percent per year. After one year, how much would you be able to buy with the money in this account? A) More than today. B) Exactly the same. C) Less than today. D) Do not know/Refuse to answer.
Question 3: True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.
These questions come from a financial literacy survey of Americans 50 and over by economists Annamaria Lusardi of the George Washington University School of Business and Olivia Mitchell of the Wharton School of the University of Pennsylvania. Only one-third of those surveyed answered all three correctly. The results were similar when the age range for the survey was broadened. That’s depressing, isn’t it? (The answers are, respectively, more than $102; less than today; and false.) My bet if you’re reading this column is that you got all three right.
You can read the rest of the column here.