Even if we grade on a very generous curve, many Americans flunk when it comes to financial literacy. Consider this three-item quiz:
- Suppose you had $100 in a savings account and the interest rate was 2 percent a year. After five years, how much do you think you would have if you left the money to grow? More than $102, exactly $102 or less than $102?
- Imagine that the interest rate on your savings account was 1 percent a year and that inflation was 2 percent. After one year, would you be able to buy more than, the same as or less than you could today with the money?
- Do you think this statement is true or false: “Buying a single company stock usually provides a safer return than a stock mutual fund”?
More of this must read article is here at the N.Y Times!