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
1. Question
You have two investment options and one promises a higher return. Is there generally:
Correct
IncorrectGenerally investments with high returns carry higher levels of risk.
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Question 2 of 10
2. Question
True or false: it is usually safer to buy shares in a single company than invest in a unit trust or managed fund.
CorrectIt 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.
IncorrectIt 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.
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Question 3 of 10
3. Question
What will be your single most valuable asset over a lifetime?
CorrectThis is why people of working age should consider income protection insurance.
IncorrectThe answer is your ability to earn an income, so make sure you consider income income protection insurance.
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Question 4 of 10
4. Question
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:
CorrectThat level of return is high in historic terms.
IncorrectThe answer is that it’s high in historic terms.
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Question 5 of 10
5. Question
Who determines the interest rates you pay and earn?
Correct
IncorrectIt’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).
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Question 6 of 10
6. Question
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
IncorrectThe answer is more than $150, thanks to compound interest.
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Question 7 of 10
7. Question
If you stashed $50,000 under your mattress, what would it be worth in 20 years’ time, taking into account inflation?
CorrectYour 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.
IncorrectYour 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.
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Question 8 of 10
8. Question
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?
CorrectASIC’s MoneySmart super contributions optimiser can show you the best mix of contributions to boost your super.
IncorrectIt’s a whopping $48,000. ASIC’s MoneySmart super contributions optimiser can show you the best mix of contributions to boost your super.
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Question 9 of 10
9. Question
The greatest cost of running a new car is:
CorrectBy 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.
IncorrectThis is an ongoing cost but the greatest cost of owning a car will be how much it depreciates – 19% in the first year.
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Question 10 of 10
10. Question
If you halve your mortgage repayments and make them fortnightly instead of monthly, do you pay less interest?
CorrectBy 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.
IncorrectBy 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.