It’s April Which Mean It’s Financial Literacy Month

And time for our annual financial literacy quiz! 

As a reminder, financial literacy is defined as the ability to understand and effectively use financial skills and tools, which include personal financial management, investing and budgeting.  Ongoing financial education of ourselves, and our children/grandchildren, is considered the backbone of financial literacy so we are furthering the cause by providing some fun and educational questions for you. 

Spoiler alert, some of these questions refer to prior “Bernie’s Blog” posts, so feel free to look back as needed.  Some questions have more than one right, or wrong, answer. 

1. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, would your ability to buy something with the money in this account be:

a. more than today

b. less than today

c. exactly the same

d. I can’t imagine the interest rate on my savings being 1% and inflation being 2%

e. No idea. Better call LFS

2. You read that you should have some “liquid” assets. Which of these is most liquid?

a. a boat on the nearest lake

b. the cash in the coffee cans in my backyard

c. my Ameritrade IRA

d. my glass of wine

e. No idea. Better call LFS

3.   How much should my emergency fund be?

a. This is a silly question - enough to cover my emergencies of course

b. 3-6 months of average expenses

c. 2 years of average expenses

d. Whatever it needs to be so I can sleep at night

e. No idea. Better call LFS.

4. When will the stock market fully recover?

a. This is not a financial literacy question, so I am not answering

b. Is the stock market down? I don’t know because LFS told me not to look.

c. When the Federal Reserve more aggressively raises interest rates

d. When the war in Ukraine is over

e. No idea. Better call LFS so they can tell me they don’t know.

5. Why are my 2022 Required Minimum Distributions (RMD’s) so high even though the market is down?

a. What’s a required minimum distribution?

b. Because I/LFS did a lousy job planning

c. Because the stock market ended 2021 at a record high

d. Because the government needs my tax dollars

e. No idea. Better call LFS.

6. When interest rates rise, what happens to bond prices?

a. They go up

b. They go down

c. They stay the same

d. They get indexed to bitcoin

e. No idea. Better call LFS