Here's a piece on becoming financially savvy courtesy of ARA Content:
Wondering how savvy you are about money matters? There’s an easy way to find out with just a few clicks of the mouse. A new test, available online at www.moneymaladies.com, lets people gauge their grasp of some of the more important -- and relevant -- financial matters that can affect their future.
The test includes 12 questions asked of more than 1,000 Americans as part of a study commissioned by Northwestern Mutual.
“Our questions included ones that are a little tougher than those often asked in typical money quizzes,” says Meridee Maynard, senior vice president of Northwestern Mutual. “And the vast majority of Americans failed to get 60 percent correct.”
For instance, the Northwestern Mutual study reveals that Americans can identify terms such as asset allocation and diversification, yet they’re unclear on specific details of their company-sponsored insurance policies, unaware of the purpose of 529 plans and uncertain as to the best protection against inflation, among other things.
Among the financial matters examined on the online test are:
- The best investments against inflation, the purpose of Index funds and the best ways to minimize investment losses when the market is in decline (most Americans fall short in knowing how to allocate their assets to achieve their financial goals).
- The facts about whole life insurance (less than half of all Americans understand the benefits of whole life insurance).
- The insurance impact of leaving a job (few Americans realize how job changes can affect their group life or disability coverage).
“We would argue that in today’s complex world it’s simply not enough to know the basics,” Maynard says. “And our research shows that Americans don’t have the depth of knowledge needed to address strategies for financial security. The online test can help people benchmark their level of financial literacy.”
According to Maynard, the Northwestern Mutual study also shows that Americans who work with a financial professional tended to score better on the test than those who did not.
“By taking the test, a person will have a good place to begin a conversation with his or her financial professional,” Maynard says.
More about the study
In addition to learning more about what Americans actually know and understand about the complexities of a long-term financial strategy, the Northwestern Mutual study looked at:
- Aspirations: What Americans are looking for out of life regarding their financial goals.
- Behaviors: Whether they’re taking the necessary actions to achieve their aspirations.
Among the findings:
- When the average American wants to retire: the average anticipated retirement age is 62, although those with a greater income or assets tend to anticipate a slightly younger retirement age.
- What keeps Americans awake at night when looking ahead to retirement: 3 in 4 point to concerns over high healthcare costs; 6 in 10 are concerned about having adequate income; 1 in 4 is worried that they’ll be unable to maintain their current lifestyle.
- How much they think they’ll need in retirement: experts suggest 80 percent of one’s pre-retirement income, but most Americans think they will, on average, need 71 percent.
- How we are saving for the short and long term: 6 in 10 of us have an employer-sponsored retirement account such as a 401(k) or 403(b); a large majority has a savings account, but fewer than half own an IRA, stocks or mutual funds.
- Saving for college: half of all Americans surveyed have children they would like to send to college and most expect to pay for at least some of that cost; but only a small share have a goal of how much they would like to save; they estimate college will cost about $100,000 but most have saved less than $20,000.
- Saving for emergencies: less than half have saved anything and another 10 percent have saved less than $1,000.
- Working with a financial professional: only 1 in 4 work with a financial professional; half say they make their decisions regarding their financial future completely on their own; most turn to the Internet for information; others turn to friends, family or financial publications.
I'm happy to say I got a 92%, but what worries me about this test is it is really a thinly veiled attempt at selling whole life. They mention lots of useful facts throughout and then conveniently only list the positives of buying lousy whole life.
Posted by: MIke B. | January 12, 2007 at 11:29 AM
Just ignore the whole life stuff. ;-)
Posted by: FMF | January 12, 2007 at 12:37 PM