Financial Literacy: Are You Lagging Behind?

posted 11/11/2013 in General

America is a lot of things, but statistics show that being “financially literate” is not a strength of our society. Despite being a world super power and having the world’s largest GDP by a good amount, we also have the highest debt of basically all forms in the world. Why? Because we don’t know how to manage money. 
Financial literacy is not a great subject for Americans. Are
better or worse off than the average American?
Perhaps the saddest part of our illiteracy is that we know it: 41 percent of U.S. adults, about 92 million people, gave themselves a grade of C, D or F on their personal finance knowledge according to a 2009 study by the National Foundation for Credit Counseling. Yet we still charge purchases to credit cards, miss payments, buy things we don’t need and put off saving for the future.
So, here’s a quiz for you to take to see if you’re in good shape or need to start hitting the books. Answers are at the bottom, but no cheating! The questions cover all aspects of finances that teens, young adults, and even middle-age and older folks need to know.
  1. True or False: If you don’t owe taxes, you won’t be penalized for filing your federal tax return after April 15th.
  2. How large should your emergency savings fund be? 
    A) As much as your current debt  
    B) 6 months of living expenses  
    C) Double your monthly rent or mortgage payment
  3. Are contributions to a traditional 401(k) deducted from your salary before or after taxes?
  4. How many times a year can you get your credit score from the three credit companies? 
    A) Once   
    B) Twice
    C) Unlimited
    D) Never
  5. What’s the minimum your FICO credit score could be to qualify for the best interest rates? 
    A) 650
    B) 700
    C) 750
    D) 800
  6. True or False: You can only invest in one 529 college savings plan per child.
  7. True or False: All income from mutual funds is subject to state income tax.
  8. If you want to improve your credit score what’s the best thing to do? 
    A) Close credit card accounts you don’t use   
    B) Pay down your debt on each card to about 25 percent of the limit   
    C) Consolidate your debt on one balance-transfer credit card
  9. Out of these three people, who needs life insurance the most? 
    A) A retired widow   
    B) A single mother with two children   
    C) A two-income couple with no children
  10. Who will have the larger sum in their account come retirement? 
    A) Dave, who saved $1,000 a year from age 25 to 35 and then let the money sit   
    B) Cindy, who saved $1,000 a year from age 35 to 65
If you found you need a little help, Lincoln Savings Bank’s financial professionals can help you get on the right track. We also offer financial guidance through the LSB Plus program, so contact us if you’re interested in learning more.
Answers: 1. True, 2. B, 3. Before taxes, 4. A, 5. C, 6. False, 7. False, 8. B, 9. B, 10. A

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