Question MarkFinancial education is essential for proper retirement planning. Of course, that’s the whole purpose of this website, to help educate people as they plan for retirement.

Well, a new report just came out by the Pension Research Council at the University of Pennsylvania’s Wharton School. It showed that adults very often make poor long-term decisions because they lack certain basic financial knowledge.

The report also found that people with greater financial literacy tended to make smarter retirement investment decisions. According to the report:

“Financially literate individuals do plan better, save more, earn more on their investments and manage their money better in retirement.”

I think that is pretty good motivation for getting a base of financial knowledge.

The researchers that wrote up the report asked 3 simple financial questions to people across 18 different countries. These questions were about 1) Interest, 2) Inflation, and 3) Investing. The three “I’s” of financial planning. Here are the 3 questions. Can you answer them?

1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After 5 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 percent per year and inflation was 2 percent per year. After 1 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.”

a. True 
b. False

To find out how you did, CLICK HERE to read the full article. The answers are at the end of the article. How did you do? Leave a comment below.

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