Do you think you know a lot about personal finance? Plenty of people across the country were stumped recently on a survey conducted by GOBankingRates, a personal finance website. They asked 529 adults of all ages a few basic questions and about one-third of respondents answered incorrectly. What may be most surprising is that it’s not one particular age group that did poorly on all questions, rather different questions for different groups.
Here are six of the questions. See if you know the answers before you read them!
- “Which of the following describes a 401k?” – A 401k is a retirement savings vehicle. 60% of those respondents age 25 and older knew that, however, only 43% of all 18-24 year olds did. 20% of the respondents in each age group thought it was a “tax credit for retirement.”
- “What does a CD offered by a bank stand for?” – The correct answer is “Certificate of Deposit,” and across all age groups, 68% of respondents answered correctly. However, the youngest group, again the 18-24 year olds, were less familiar with this term as only 36% of them knew the answer. 80% of adults age 45 or older knew the answer.
- “What is net worth?” – Net worth is the “value of someone’s assets minus their liabilities.” Only 59% of respondents knew this, with many believing the correct answer is “income after taxes.” People were likely tripped up by the concept that your net earnings is represented by your income after taxes and this is a popularly used term.
- “Which of the following does not impact your credit score?” Only 60% of respondents knew that one’s income does not affect their credit score. Many incorrectly guessed that the “types of current credit” didn’t impact a credit score, however, having a mix of different types of credit accounts makes up 10% of your credit score.
- “What does HELOC stand for?” – This was one of the harder questions on the quiz. The correct answer is Home Equity Line of Credit. This stumped people of all ages, but about 30-40% of each age group answer it incorrectly. Of the people who got this question wrong, 10% selected “HELOC is not a real thing,” assuming it was a trick question!
- “What are the three major credit bureaus?” – 65% of respondents answered this correctly, stating TransUnion, Equifax, and Experian were the answers. Here’s where responses are interesting: Only 29% of people ages 18-24 knew the answer, with many selecting “Visa, Mastercard, American Express” (40%) or “Bank of America, Wells Fargo, Chase” (20%). This means our youngest borrowers need to be better educated about who holds their credit reports!
If you read this blog often, hopefully you got many correct. Keep reading our articles to learn more about credit and finances (and cars!) so that you can up your literacy!
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