Personal Finance

Do you have money smarts?

Americans still can't answer some basic personal finance questions correctly — and that's not even the worst news from a new survey on financial capability.

The Financial Industry Regulatory Authority Investor Education Foundation has been asking consumers the same five questions since 2009, with lackluster results. The latest version surveyed 27,564 adults across the 50 states and District of Columbia.

(No spoilers here. Try the quiz at the end of the story to see what they ask, and how your knowledge stacks up.)

You would think by now that consumers would have a sense of how to calculate savings account interest and what effect inflation has on their buying power, but the figures are still dismal. In 2009, 42 percent of consumers could answer at least four of the five quiz questions correctly; now, only 37 percent were able to. The overall survey average was 3.2 correct answers.

In the FINRA survey, the biggest knowledge drop was on a question over the relative risk of stocks versus mutual funds. Only 46 percent of consumers were able to answer that true-false question correctly, down from 53 percent in 2009.

That included dips among wealthy respondents. The number of consumers earning $75,000 to $100,000 per year who could correctly answer that risk question fell 10 percent compared with 2009; among those making $150,000-plus, it dropped 7 percent.

"I'm one of the few people who doesn't find these findings surprising at all," said study co-author Annamaria Lusardi, a professor of economics at George Washington University.

Financial literacy improvements in recent years have largely been small, concentrated efforts, she said. A report out earlier this year from the Council for Economic Education found that fewer states require high school students to complete a course in economics than did in 2014, and the number requiring a personal finance education during high school remain unchanged.

Without an improvement in formal financial education, Lusardi said, it's not surprising that consumers' real-world knowledge hasn't improved.

A track record of knowledge gaps paints a troubling picture, expects say, but here's the other shoe: More people are unaware that their financial knowledge is lacking. Three-quarters of survey respondents told FINRA they are confident in their financial abilities, up from 67 percent who said so in 2009.

"If you don't know what you don't do well, how can you improve?" said Billy Hensley, senior director of education for the National Endowment for Financial Education.

FINRA's survey isn't the only indicator of misplaced confidence. In a National Foundation for Credit Counseling survey, 56 percent of consumers gave themselves an "A" or "B" in personal finance knowledge. Optimistic, considering that 60 percent also said they didn't have a budget, 14 percent roll over more than $2,500 in credit card debt month to month and 26 percent save nothing each month for retirement.

Another study of older adults found that self-confidence in financial knowledge didn't decrease with age, even as financial literacy scores dropped off after age 60.

Such a mismatch of financial knowledge and confidence is dangerous, said Hensley. It can lead consumers to rest on the laurels of previous decisions when the marketplace has evolved, with costly results. (Think: "I did just fine on my last car purchase 10 years ago," or "I researched my 401(k) investment options when I signed up.")

"People view it as, same old, same old," he said. "In reality, financial life is getting more complicated. The products are more complicated, there are more decisions to make."

In the case of older adults, the combination of misplaced confidence and wealth is also what makes them targets for scams and financial fraud, said Lusardi.

So if you try the quiz and get anything other than a perfect score, rejoice. You now know what you don't know (or at least, some of it).

"Without a check, without a test, we think we are doing well," she said. "Ignorance is not bliss in this case, not at all."

Use that as a jumping-off point for a refresher, and a reminder to brush up regularly even if you're revisiting a decision that seems rote, like opening a new credit card. By that same measure, don't let acing the quiz make you complacent. Financial literacy is less of a one-and-done class than an ongoing effort, said Hensley.

"I hope people begin to understand that this is a lifelong pursuit," he said. "We all need to refresh ourselves when we're ready to make a decision.

"No matter how confident you are … double check, ask questions, educate yourself."