MONEY investing strategy

Most Americans Fail This Simple 3-Question Financial Quiz. Can You Pass It?

piggy bank with question marks on it
Peter Dazeley—Getty Images

These questions stump most Americans with college degrees.

Following are three questions. If you’ve been around the financial block a few times, you’ll probably find all of them easy to answer. Most Americans didn’t get them right, though, reflecting poor financial literacy. That’s a shame — because, unsurprisingly, the more you know about financial matters and money management, the better you can do at saving and investing, and the more comfortable your retirement will probably be.

Here are the questions — see if you know the answers.

  1. Suppose you had $100 in a savings account and the interest rate was 2% 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.
  2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% 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.
  3. Please tell me whether this statement is true or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.

Did you get them all right? In case you’re not sure, the answers are, respectively, A, C, and False.

Surprising numbers

The questions originated about a decade ago, with Wharton business school professor and executive director of the Pension Research Council Olivia Mitchell, and George Washington School of Business professor and academic director of the Global Financial Literacy Excellence Center Annamaria Lusardi. In a quest to learn more about wealth inequality, they’ve been asking Americans and others these questions for years, while studying how the results correlate with factors such as retirement savings. The questions are designed to shed light on whether various populations “have the fundamental knowledge of finance needed to function as effective economic decision makers.”

They first surveyed Americans aged 50 and older and found that only half of them answered the first two questions correctly. Only a third got all three right. As they asked the same questions of the broader American population and people outside the U.S., too, the results were generally similar: “[W]e found widespread financial illiteracy even in relatively rich countries with well-developed financial markets such as Germany, the Netherlands, Switzerland, Sweden, Japan, Italy, France, Australia and New Zealand. Performance was markedly worse in Russia and Romania.”

If you think that better-educated folks would do well on the quiz, you’d be wrong. They do better, but even among Americans with college degrees, the majority (55.7%) didn’t get all three questions right (versus 81% for those with high school degrees). What Mitchell and Lusardi found was that those most likely to do well on the quiz were those who are affluent. They attribute a full third of America’s wealth inequality to “the financial-knowledge gap separating the well-to-do and the less so.”

This is consistent with other research, such as that of University of Massachusetts graduate student Joosuk Sebastian Chae, whose research has found that those with higher-than-average wealth accumulation exhibit advanced financial literacy levels.

The importance of financial literacy

This is all important stuff, because those who don’t understand basic financial concepts, such as how money grows, how inflation affects us, and how diversification can reduce risk, are likely to make suboptimal financial decisions throughout their lives, ending up with poorer results as they approach and enter retirement. Consider the inflation issue, for example: If you don’t appreciate how inflation shrinks the value of money over time, you might be thinking that your expected income stream in retirement, from Social Security and/or a pension, will be enough to live on. Factoring in inflation, though, you might understand that your expected $30,000 per year could have the purchasing power of only $14,000 in 25 years.

Mitchell and Lusardi note that financial knowledge is correlated with better results: “Our analysis of financial knowledge and investor performance showed that more knowledgeable individuals invest in more sophisticated assets, suggesting that they can expect to earn higher returns on their retirement savings accounts.” Thus, better financial literacy can help people avoid credit card debt, take advantage of refinancing opportunities, optimize Social Security benefits, avoid predatory lenders, avoid financial scams and those pushing poor investments, and plan and save for retirement.

Even if you got all three questions correct, you can probably improve your financial condition and ultimate performance by continuing to learn. Many of the most successful investors are known to be voracious readers, eager to keep learning even more.

TIME

Are You Secretly an Introvert?

Take our quiz to find out

People often speculate about their personality types. But where do you truly fall on the spectrum between introvert and extrovert—and what does that say about how you live your life? We talked to Susan Cain, author of QUIET: The Power of Introverts in a World That Can’t Stop Talking and co-founder of Quiet Revolution, to assemble a list of telling questions.

This quiz was adapted from Cain’s New York Times bestselling book Quiet: The Power of Introverts in a World that Can’t Stop Talking.

Read next: 10 Tips Every Introvert Should Know

Listen to the most important stories of the day.

TIME

How Well Do You Know YouTube’s Greatest Viral Videos?

A quiz that'll test your smarts on Friday, Keyboard Cat, David After Dentist and more


(Credit for all images: Youtube)

MONEY Taxes

Some Need to Take a Quiz to Get Their Tax Refund

Pop Quiz! written on black chalkboard
Isaac Koval—Getty Images

In Ohio, state officials are trying to stop tax identity theft by requiring some taxpayers to fill out an online quiz before accepting their returns.

State governments around the country are struggling with tax return identity theft, a problem so rampant that even TurboTax had to temporarily suspend electronic state filing. In Ohio, where 58,000 fraudulent tax returns have been intercepted this tax season, state officials have taken the drastic step of requiring some taxpayers to fill out an online quiz before accepting their returns.

“The Ohio Department of Taxation has intercepted more than $250 million of fraudulent refund claims this year,” the agency said on its website. That’s a huge increase from 10,000 fraudulent returns seeking $8 million last year, according to the Dayton Daily News.

Once a computer determines that something is suspicious about the return, taxpayers are directed toward the “quiz,” which will look a lot like the out-of-wallet challenge questions posed by AnnualCreditReport.com and other sites seeking to authenticate consumers. According to taxpayers who say they’ve been challenged, the questions ask users to confirm streets they’ve lived on, cars they’ve owned, and so on.

“This is changing daily, but as we are still relatively early in the filing season, the Ohio Department of Taxation is opting to be more stringent with the screening of returns,” said Gary Gudmundson, the agency’s communications director. “Of the 1.2 million returns requesting a refund, 49% of those filers/taxpayers … have been directed to take the Identity Confirmation Quiz.”

Users directed to the quiz can expect delays in receiving their tax refunds; how long is unclear. Those who cannot correctly answer the questions can expect additional delays. They will be directed to telephone operators for additional verification.

“Of those who’ve taken the quiz, 95% passed. Those who don’t are asked to submit documentation (copy of driver’s license, birth certificate, utility bills, previous year(s) tax returns, etc.) to prove they are who they say they are,” said Gudmundson.

One user who said she failed to answer correctly wasn’t immediately booted from the system.

“Did it and apparently answered one wrong but they give you another chance,” she wrote on Facebook.

Given the heightened concern about identity theft and tax returns, some residents are worried the challenge questions are part of a scam. Ohio tax officials are telling taxpayers via regular mail that they must complete the quiz.

“If you get a letter, yes it is from the state, not a con,” wrote one Ohio resident on her Facebook page.

For an identity thief to steal your tax return, they need a lot of personal information, including your Social Security number, which can be used to perpetrate all sorts of fraud, even opening new accounts in your name and wrecking your credit in the process. You can spot identity theft quickly by regularly monitoring your credit. You can get your credit reports for free once a year at AnnualCreditReport.com and you can get your credit scores for free every month on Credit.com.

More on Income Tax:

TIME

Can You Guess How Much These Stunning Homes Sell For?

Warning: quiz may cause wanderlust.

Correction appended, March 11

The following home values are based on current real estate listings, as well as completed 2014 sale prices.

All listing and price information courtesy Sotheby’s International Realty and Christie’s International Real Estate.

Correction: The original version of this story, based on information provided by real estate agencies, incorrectly identified the homes listed by Christie’s International Real Estate as being sold in 2014. Those homes are still on the market.

TIME

Quiz: Are You Actually Addicted to Facebook?

Facebook
Dado Ruvic—Reuters

We talked to experts at the Center for Internet Addiction to offer an instant (but unofficial) diagnosis.

This quiz was adapted from the Center for Internet Addiction’s Internet Addiction Test.

TIME

Quiz: Can You Guess Which Celebrity Is Worth More?

Beyonce vs. Jay-Z, Katy vs. Rihanna, Kobe vs. Lebron and more.

Figures based on 2014 estimated earnings, as listed on the Forbes Celebrity 100.

All images by Getty Images

TIME facebook

How Well Do You Know Your Facebook Friends?

Take this quiz to find out

We all have Facebook friends with certain tells in their choice of status updates. There are the unabashedly peppy, the unrelenting complainers and the 800-word posters. To test how well you can identify your Facebook friends by these clues, we’ve built a simple quiz: This app will randomly select status updates from your recent newsfeed and present you with five possible authors for each one. (Note: This will not work for all users due to differences in privacy settings. If you’re asked for your password, you’ll be logging into Facebook. TIME is not recording or storing your password.)

Research suggests that a lot of our offline personality can shine through on Facebook, even if most of us complain about our friends’ behavior online. (And don’t delay. Facebook will soon be shutting down the service that lets us make apps like this one or the classic “How Much Time Have You Wasted On Facebook?”)

Read next: Find Out Which of Your Facebook Friends Makes You the Happiest

TIME advice

How to Follow Your Passion Even if You Don’t Know What It Is

Close up of hear shape made of pages of open book
Getty Images

Take note of what has consistently fascinated you for months, years, or even since you were a kid

This article originally appeared on Levo.com.

I, personally, am tired of people giving advice like, “just follow your passion,” or “do what you love and the money will come.”

If you’re one of the (very few) Millennials out there who knows exactly what you want to do with your life, and you’re taking conscious, consistent steps toward it… then by all means, continue to follow your passion!

But most of us aren’t in that boat. If you’re like the majority of Millennials, you’re still struggling to uncover what it is that you’re actually passionate about. So what’s intended as an inspirational phrase turns into one more thing to stress about and judge yourself for.

How are you supposed to follow your passion if you don’t even know what it is?

I’ve been there… and it’s not fun.

(MORE: Build Your Career Around Passion)

The (Short) Backstory

I’ve always been so inspired by people who have created something amazing and impactful at a young age. I’m fascinated by college students who created successful start-ups. I’ve always been drawn to read bestselling books by people in their early 20s (or younger). And for years I’ve followed tons of blogs by other Millennials with an online empire.

As much as I admired these young entrepreneurs, it never really occurred to me that I could become one. “Normal” people don’t do things like that.

So after college, I did what I was “supposed” to do: I got a stable, decent-paying job in the field that I majored in (professional writing).

I knew I liked writing (I’ve always proudly been a huge book nerd), so I thought maybe that was my passion. And I figured, as long as I was in a job where I could write all day, I’d be happy, right?

Wrong.

Turns out your passion isn’t limited to a singular activity… it’s something much deeper.

Whenever I was bored or frustrated at my old 9-to-5s, I found myself pulling up those blogs or articles about the young entrepreneurs that inspired me so much. They seemed to have so much freedom in their lives and work–they got to make their own rules, be completely themselves at their job, and spend their time doing something worthwhile.

I was so jealous!

Then one day it finally occurred to me that, (duh) there was nothing stopping me from creating that kind of life for myself.

That’s when it hit me that I was in the completely wrong job category.

I had tried over and over again to be happy working at a company as an employee, when it was just never going to work for me. I was craving the autonomy and freedom of entrepreneurship.

It didn’t even matter that my jobs allowed me to write all day, which is something that I loved (and still love). The fact that I didn’t get to choose what, when, and why I was writing sapped all the intrinsic joy right out of it for me.

When I finally embraced the fact that I would never be truly happy unless I was working for myself, then I was able to get clear on what I actually wanted to do for my job. And I surprised myself by realizing that I only wanted writing to be a part of what I did. Mostly, I wanted to help people become the director of their lives, instead of the passenger, which is why I became a life and career coach for Millennial women.

I’m certainly not saying that entrepreneurship is the answer for everyone. In fact, I know several Millennials who tried to start their own business and quickly burnt out (even though they were supposedly “living their passion”) because they realized that what they actually wanted was the stability and collaboration that comes with working at a company.

The takeaway: Until you first know how you want to express your passion, it can be hard to get clear on what your passion is in the first place.

So how can you start getting that clarity now?

1. Take note of what has consistently fascinated you for months, years, or even since you were a kid. Upon first glance, these things might seem trivial or silly, but if you give them a closer look, I guarantee there’s some valuable information there to help your clarify your passion.

2. Figure out how you want your passion to show up. It’s time to be honest with yourself: When it comes to your job, how important is collaboration and teamwork to you? How well do you deal with authority? Do you need your passion to be a part of your day-to-day work life, or would that sap all the joy out of it? If you’re still not sure how you want your passion to show up, you might want to take a simple quiz I co-created to help you figure it out: It’s call the Passion Profile Quiz, and within 5 minutes it’ll pinpoint exactly how you want your passion to intersect with your career.

If I’d paid attention to what had drawn my attention and fascination for years, I may have 1) become an entrepreneur and 2) discovered that I wanted to become a coach much earlier and saved myself several years of frustration.

Trust me, it’s a lot easier to figure out your passion (and then “follow your passion”) if you first know how you want to express it.

(MORE: How to Support Your Passions After College)

TIME conflict

Quiz: Test Your Berlin Wall Knowledge

West Germans Celebrate The Unification Of Berlin Atop The Berlin Wall During The Collaps
Stephen Jaffe—Getty Images West Germans celebrate atop the Berlin Wall on Nov. 12, 1989.

For the 25th anniversary of the fall of the Berlin Wall, see how much you remember about it

The Berlin Wall began to come down 25 years ago this weekend, on Nov. 9, 1989. Now that so many years have passed, how much do you remember about the wall and the events surrounding it?

Test your knowledge with this quiz — extra points if you don’t use our Berlin Wall history timeline to cheat.

Read TIME’s 1989 cover story about the fall of the Berlin Wall here in the archives: Freedom!

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