A recent study of Americans knowledge of financial matters showed that more than two-thirds of Americans (69%) were stumped about financial products and concepts. The study was commissioned by Northwestern Mutual and conducted by Matthew Greewald & Associates. According to the study, only one-third of those surveyed knew that index funds try to match returns of a stock or bond benchmark. Also, only one-third knew that the average rate of inflation was closer to 3 percent rather than 6 or 9 percent.
On more basic financial matters, average answers showed more promise. Eighty-eight percent of the respondents knew the definition of diversification, 79 percent knew asset allocation, and 57 percent knew dollar-cost averageing. And nearly 80 percent of survey takers strongly agreed with the importance of understanding their own financial situation – ranking 7 or higher on a scale of 1 to 10.
In conjunction with the study, Northwestern created a brief 14 question online quiz that you can take at http://www.financialmattersquiz.com and test your own knowledge. It’s a little heavy on insurance related topics (which makes sense because Northwestern Mutual is an insurance company), but it’s pretty good.
“We know from this study that most Americans want to be financially self-sufficient, and are focused on preserving their lifestyles and protecting against uncertainty,” explains Dave Simbro, Northwesters Mutual vice president – life products. “This desire makes improving our nation’s financial literacy especially relevant, and we believe the first step is an honest assessment of one’s personal finance proficiency.”
In another study done by Metlife, 53% of more-affluent Americans (investable assets of at least $200,000) believe the help of a professional financial advisor is required when planning for retirement.
It’s interesting that 69% of the American population can’t pass a financial products & concepts quiz, yet only about half of the population feels they need the help of a financial professional.
If knowledge of financial products and concepts is not your area of expertise (and that’s OK if it’s not), call us today for a no-cost, no-obligation appointment. We’ll review your current financial situation with you and help you see if you might benefit from the help of a professional advisor.
