Nobody likes to get a poor grade. But those online "test-your-financial-literacy quizzes can be irresistible. They're short. You think you'll do pretty well. Then, wham. You failed.
How bad should you feel?
Probably not very.
When U.S. managers, including corporate executives, were tested on basic financial literacy, the average score was a paltry 38%, according to the Harvard Business Review. Few could distinguish profit from cash, and most couldn't pick the correct definition of "free cash flow."
Quizzes range in complexity and number of questions. This one, from the Financial Industry Regulatory Authority, has just six questions. Another six-question quiz stumped a lot of Americans. Here's a way to boost your own financial literacy with 10 questions.
A 38-question quiz from the American College of Financial Services zeroes in on your knowledge of retirement income. To get a good score, you'll need to know something about annuities, Social Security and different types of insurance.
Or take this super short, three-question quiz that zeroes in on your knowledge of risk and return with scenarios written in plain, easy-to-follow English.
"The interesting thing about financial literacy: The jury's all over the place," said Michelle Begina, a certified financial planner and managing director of Snowden Lane Partners, an investment advisor.
Whether it works or doesn't work is still up for grabs. Begina says only one study points to something specific —numeracy, or a person's attitude toward and ability to use numbers — that can actually influence financial literacy.
A poor score may not even be your fault. Many people come to financial literacy relatively late, if at all. Only a handful of states have a mandatory personal finance course for high school students.
What the quizzes provide is information, Begina says. The biggest thing you can learn is what you don't know.
Begina looks at the quizzes and people's results through a lens of financial psychology. "What you need to understand is compounding, inflation and the time/value of money," she said. Then, you need to be able to perform the calculations to answer the number questions.
Like any other subject you'd want to learn about, there is no single book that will give you everything you need. "Even if you just took those six FINRA questions, two are about diversification and bonds," Begina said. "The others are math questions.
"Even answering all six correctly may not lead to you making sound decisions over time."
In other words, your score is a very limited view of your financial acumen.
We all have a money personality. "Our social, emotional growing-up influenced how we were raised," she said. "When you put all three together, it leads to behavioral decisions."
A bad score should not make you feel bad. "These tests are not predictive" of any real behavior or financial outcome, says Begina. At the very least, maybe the test will spark an interest and inspire you to learn more.
As in other areas of life, actions speak louder than words. A great score on a financial quiz is meaningless if someone does not treat money responsibly.
Most people likely know that answering a three- or five-question quiz isn't enough to fill in all the blanks in their financial knowledge, but it could be the trigger they need. Sometimes a person just needs a motivating spark to make them realize they need to learn more about money.
Even if they're not the be-all, end-all, there's still some value in testing your financial know-how. No one thing — no person, book or thing — is the definitive answer on boosting your financial acumen. "The quiz you take can aid in increasing awareness," Begina said. "And that is the most valuable thing to glean."