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April is Financial Literacy Month

And so as always it is also time for our annual financial and investment literacy quiz…

 

But first some interesting findings from those who study financial literacy among American adults over time:

  • The recently released 2022 Personal Finance Index sponsored by the TIAA Institute and the Global Financial Literacy Excellence Center at George Washington School of Business said that the biggest gap in financial literacy is “understanding financial risk” while the area where U.S. adults are the most knowledgeable is “borrowing money”.  Hm.  You can find all of the results of this study at https://www.tiaa.org/public/institute/publication

 

    • One of the questions on this 2022 survey asked which of the following is a greater financial risk:

      • 50% chance of car needing repairs of $1000 in 6 months

      • 10% chance of air conditioner needing replacement at cost of $4000 in 6 months

 

We have not included this question in our quiz because our definition of financial risk (as all of you can now recite) is having to sell an asset at an inopportune time to cover an expected or unexpected expense. 

 

 

Now our quiz:

  • What is the difference between a market order and a limit order?

    1. A market order means that Marci decides when to buy or sell and a limit order means that Lori decides when to buy or sell

    2. A market order is an order to buy or sell at current price while a limit order is an order to buy or sell at a specific price or better

    3. A market order is one that happens when the market is open and a limit order is an order which happens when the market is closed

    4. This is a dumb question - I am investing for the long term, not buying and selling every day

    5. No idea.  Guess I better call LFS.

 

  • What is an expense ratio?

    1. The cost of buying or selling a stock

    2. One of the many useless columns in the LFS quarterly spreadsheet

    3. The amount of money I pay to borrow money from a bank

    4. The percentage of a mutual fund assets which are used to pay that fund’s expenses

    5. No idea.  Guess I better call LFS

 

  • What is the difference between a traditional IRA and a Roth IRA?

    1. Traditional IRA contributions are tax-deductible and Roth contributions are not

    2. Roth IRA withdrawals are tax-free and Traditional IRA contributions are not

    3. Both a and b are correct

    4. I have both so what difference does it make anyway?

    5. No idea.  Guess I better call LFS

 

  • If interest on my high yield savings account is 1% and inflation is 2%, my ability to buy anything in a year will be

    1. Better than today

    2. Worse than today

    3. Bring it on – love to have THIS problem

    4. Who cares?  There is nothing worth buying anyway.

    5. No idea.  Guess I better call LFS. 

 

  • Which of the following are FDIC insured?

    1. The $25,000 CD I just bought in my new Schwab account

    2. The $25,000 in my Synchrony High Yield Savings account

    3. The $25,000 in cash in my Ameritrade Roth IRA

    4. My GE stock

    5. The $25,000 in the Schwab Money Market Mutual Fund

    6. No idea.  Actually do call LFS on this one!

Charles Morell