Less than half of the world's population can answer this incredibly simple financial question

Business Insider ^ | 11/19/2015 | Mike Bird

[SeekAndFind]

A major survey on financial literacy has just been published, and the results are terrible.

McGraw Hill Financial (which owns S&P), the World Bank, and Gallup have produced the S&P Global Financial Literacy Survey, which attempted to get an idea of how financially literate the world is by polling 150,000 adults in more than 140 countries.

The group defined financial literacy as the ability to answer three of four really simple questions about inflation, risk, and interest. Take a look.

One of the easiest questions on the test is about interest. There is no compounding involved, and the numbers themselves aren't at all complicated. Here it is:

"Suppose you need to borrow 100 (country currency). Which is the lower amount to pay back: 105 (country currency) or 100 (country currency) plus 3%?"

It's a bit terrifying that only 49% of the people polled around the world could answer that

[setha]

PISA-style test sampling issues and educational streaming favoritism can't hide everything.

[Vendome]

100 @ 3% simple interest or APR over some years? /S

[Ruy Dias de Bivar]

Back in 1977, I tried to borrow $100 dollars from an Oklahoma bank. The interest was 25%. I was desperate and agreed to those terms. Then they turned me down.

When I retired in 2008, I put my retirement funds in a different bank. I always remember how the Oklahoma bank lost my accounts because of this.

[SeekAndFind]

Why not take the whole test? Five questions only:

1) Suppose you have some money. Is it safer to put your money into one business or investment, or to put your money into multiple businesses or investments?

ONE
MULTIPLE
DON’T KNOW
REFUSED

2) Suppose over the next 10 years the prices of the things you buy double. If your income ALSO doubles, will you be able to buy less than you can buy today, the same as you can buy today, OR more than you can buy today?

LESS
THE SAME
MORE
DON’T KNOW
REFUSED

3) Suppose you need to borrow 100 dollars. Which is the lower amount to pay back: 105 dollars or 100 dollars plus three percent?

105
100 + 3%
DON’T KNOW
REFUSED

4) Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add MORE money to your account the second year than it did the first year, or will it add the SAME amount of money both years?

MORE
THE SAME
DON’T KNOW
REFUSED

5) Suppose you put money in the bank for two years and the bank agrees to add 15 percent per year to your account. Will the bank add MORE money to your account the second year than it did the first year, or will it add the SAME amount of money both years?

MORE
THE SAME
DON’T KNOW
REFUSED

[SeekAndFind]

BTW, if you got ALL questions right ( as I did ), you belong to the elite 36% of the world who did so as well.

[Jim Noble]

Less than 2% of the world’s population can answer an even simpler question: “What is money, and where does it come from”?

[bgill]

That map tells a lot more about cultures, too.

Perhaps they should have asked the question with 100 goats.

[ProtectOurFreedom]

Staggering, isn’t it? Those are right up there with “Which is greater? 5 or 3?”

BTW, your #5 is the same as #4.

[SeekAndFind]

RE: BTW, your #5 is the same as #4.

That’s why it would make no sense to answer one correctly and answer the other wrongly. :)

[21twelve]

I wonder how many people are map-drawing literate? With my tired eyes it is really hard to see the subtle changes in blue!

[21twelve]

I’m not sure how much of this is finance, and how much of it is just not knowing or understanding basic math concepts, or how to solve a problem that requires a bit of thought.

I wonder how many of the people asked have some simple, mundane job that doesn’t require them to think. Or if their eyes glaze over at the thought of finances or math. And the percentage thing - that might be a pretty complex idea that I imagine a lot of people in the world have never learned, where how much different something is thought of as a bit more, some more, a lot more, etc.

I wonder if you asked some guy out in the field the same questions worded differently?

If the bean plants double in number in 5 years, but your family can pick them twice as fast in 5 years - will you still be able to harvest all of the beans?

(Don’t ask me though. I’m no farmer!)

[The Ghost of FReepers Past]

I don’t think they exist any more, but there used to be loan places like HFC that charged a crazy high rate of interest with a huge penalty for early payoff. I got one loan there for some stupid reason. I had to learn the hard way, I guess. I paid it off early and paid the horrible penalty just to cut my losses.