Money. So easy, a school kid can explain it, right? But most of us got through school without learning a single useful thing about money and now we’re playing catch-up in the real world. Last week, we exploded 10 money myths and for more than four years, we’ve been providing sound, unbiased information to help you keep your financial affairs on track.
If you have kids, the good news is that there’s a growing list of Money Smart schools around Australia whose pupils are benefiting from ASIC’S excellent teaching resources. Some banks are hopping on board, too, to build financial literacy amongst children and young adults. For you, there’s The Really Simple Guide to Money!
This week, see how you’re faring with our quick financial literacy test.
While there are no ‘winners’, if you score below 5/10 you should find a financial advisor immediately!
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Question 1 of 10
You have two investment options and one promises a higher return. Is there generally:Correct
Generally investments with high returns carry higher levels of risk.
Question 2 of 10
True or false: it is usually safer to buy shares in a single company than invest in a unit trust or managed fund.Correct
It is better to spread your risk with a managed fund which holds shares in different companies. Diversifying your investment helps lower the risk of loss.Incorrect
It is better to spread your risk with a managed fund which holds shares in different companies. Diversifying your investment helps lower the risk of loss.
Question 3 of 10
What will be your single most valuable asset over a lifetime?Correct
This is why people of working age should consider income protection insurance.Incorrect
The answer is your ability to earn an income, so make sure you consider income income protection insurance.
Question 4 of 10
You are thinking of buying an investment property because prices in your chosen area went up 15 per cent last year. Is that level of return:Correct
That level of return is high in historic terms.Incorrect
The answer is that it’s high in historic terms.
Question 5 of 10
Who determines the interest rates you pay and earn?Correct
It’s the financial institutions and the banks (excluding the Reserve Bank, who sets the cash rate and influences other banks but has no direct control).
Question 6 of 10
You deposit $100 into a bank account that pays 10 per cent interest every year, and leave it there for five years. In five years’ time you will have:Correct
The answer is more than $150, thanks to compound interest.
Question 7 of 10
If you stashed $50,000 under your mattress, what would it be worth in 20 years’ time, taking into account inflation?Correct
Your money will be worth less than it is today. To keep your current buying power you’ll need to invest your money and earn at least as much as the rate of inflation.Incorrect
Your money will be worth less than it is today. To keep your current buying power you’ll need to invest your money and earn at least as much as the rate of inflation.
Question 8 of 10
Dave, 25, earns $48,000 per year. If he puts an extra $20 per week from his take-home pay into his super fund earning 6.2% return, what sort of difference could that make by age 65?
Question 9 of 10
The greatest cost of running a new car is:Correct
By the time your new $20,000 car reaches the first traffic lights, it’s only worth about $18,000. After the first year, it’s lost about 19% in value.Incorrect
This is an ongoing cost but the greatest cost of owning a car will be how much it depreciates – 19% in the first year.
Question 10 of 10
If you halve your mortgage repayments and make them fortnightly instead of monthly, do you pay less interest?Correct
By doing this you will make the equivalent of 13 monthly repayments in a year, instead of 12. This reduces your interest and helps you pay your loan off sooner.Incorrect
By doing this you will make the equivalent of 13 monthly repayments in a year, instead of 12. This reduces your interest and helps you pay your loan off sooner.