To test the general public’s financial literacy, the American Bankers Association (ABA) Foundation posed these five questions, how do you score in financial literacy?
1. What is considered a good credit score?
Answer: Credit scores can range from 300 to 850. Generally, anything over 700 is a good score. Your score factors in your payment history, types of credit, and outstanding debt.
2. If you must borrow $200, would you rather pay back $205 or $200 plus 5% interest?
Answer: $205 is better because $200 plus 5% interest comes out to $210.
3. You have $1,000 in a savings account earning 2% interest a year. After two years, how much would you have?
Answer: The savings would grow to $1,040.40 by the end of the second year because of compounding interest.
4. If you’re investing, is it safer to put your money into a single holding or multiple assets?
Answer: It’s safer to put money into multiple assets. Through diversification, your risk of losing money decreases when money is spread across multiple investments (although there are no guarantees).
5. Over the next 15 years, the cost of living and your income both double. Will you be able to buy more, the same or less than today?
Answer: The same. Inflation drives up costs, but buying power stays the same when inflation and income rise at the same rate.
How did you do on this quiz? You may need more guidance than you thought. Talk to one of our Withum Wealth advisors to learn more about your finances and what more you can do.
Please note that various factors such as changes in tax laws, inflation, and the uncertainty of social security can have a significant impact on the results of the study discussed in this section. This presentation was designed for educational purposes only and is not intended for specific legal, accounting, investment, income tax or other professional advice. Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Withum Wealth Management, [“WWM”]), or any non-investment related content, made reference to directly or indirectly in the presented material(s) will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this presentation serves as the receipt of, or as a substitute for, personalized investment advice from WWM. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. WWM is neither a law firm nor a certified public accounting firm and no portion of the presented material(s) should be construed as legal, accounting or consulting advice. A copy of the WWM’s current written disclosure statement discussing our advisory services and fees is available for review upon request. To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code. ©2012 Advisor Products Inc. All Rights Reserved.