Only 15% of U.S. adults answered seven or eight questions correctly on a new financial literacy test, while more than one-third managed no more than two correct answers. The results point to widespread difficulty understanding money concepts that affect everyday decisions about saving, borrowing, insurance and investing.
The eight-question P-Fin 8 Index was developed by the TIAA Institute and the Global Financial Literacy Excellence Center as a shorter version of their broader 28-question Personal Finance Index. Each question represents one area of personal finance, including earning, spending, saving, investing, debt management, insurance, risk and identifying reliable financial information.
On average, adults answered 46% of the questions correctly. Sixty percent scored four or fewer out of eight, including 36% who answered no more than two correctly. Another 24% scored three or four, while 24% answered five or six correctly.
Some questions proved especially challenging. Only 27% correctly identified disability insurance as the coverage a healthy 25-year-old worker would most likely need in the near term. Just 40% understood how quickly a loan carrying 20% annual compound interest would double, while fewer than half correctly answered questions involving inflation, financial risk and investment advice.
The findings suggest that many Americans are making consequential financial choices without a strong understanding of the principles behind them. Improving financial literacy cannot eliminate rising prices, debt or economic uncertainty, but it can help people make better-informed decisions about their money and recognize costly mistakes before they happen.
Think you can beat the national average?
Take the official eight-question P-Fin 8 financial literacy quiz and compare your score with the national results.
