WHO IS “FINANCIALLY COMPETENT”?
THE ING INTERNATIONAL SURVEY ON FINANCIAL COMPETENCE TESTED MORE THAN 11,000 PEOPLE IN 11 COUNTRIES IN EUROPE ON THEIR UNDERSTANDING OF INTEREST RATES, MORTGAGES,
INFLATION AND MORE.
Those who scored 80% or higher (four or more in the five-question test) were more likely to:
Be aged over 25: NOT SURPRISING AS PEOPLE CAN LEARN THROUGH TRIAL ERROR, AND EXPERIMENCE AS THEY AGE
Manage their money very carefully - going through bank statements, credit card bills and other documents thoroughly every month
WHEN ASKED “HOW DO YOU KEEP CONTROL OF YOUR MONEY?". THE PERCENTAGE WHO ANSWERED VERY CAREFULLY WAS
Not argue with their life partner about money
BUT SOME DO STILL HAVE DISAGREEMENTS OVER MONEY - SUCH AS IF ONE HALF GOES ON A SPENDING SPREE, ANNOYING THE OTHER.
And have some “financial education’*, such as school, university or studying online resources or from books
Remember, it's never too late to learn...
30% OF THOSE WHO SCORED 80% OR MORE DIDN’T HAVE ANY FINANCIAL EDUCATION. COMPARED WITH 46% OF THOSE WHO SCORED LESS.
Make their own financial decisions
INSTEAD OF RELYING ON OTHERS TO MAKE CHOICES FOR THEM.
It might come as a surprise but those who scored well were not necessarily happier with their lives. And almost one-in-five (18%) of them admit to spending longer shopping for clothes than looking for a good savings account.
Suppose you had €100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if the money was left to grow?
- Around €102
- Around €105
- Around €110
Imagine the interest rate on your savings account was 1% and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
- More than today
- Exactly the same as today
- Less than today
If interest rates rise, what will typically happen to bond prices?
- They will rise
- They will fall
- They will stay the same
A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less.
For the same amount of money, a person can enter one of the following lotteries. Lottery A pays a prize of $200 and the chance of winning is 5%. Lottery B pays a prize of $90,000 and the chance of winning is 0.01%. In either case, if
one does not win, one does not get any money. Which lottery pays the higher average amount?
- Lottery A
- Lottery B
- The two lotteries pay the same average amount