The Atlantic magazine recently published an article entitled “Most People in the World Have No Idea How to Manage their Money”. That article was republished on Yahoo! Finance. Excerpts from that article are:
“Do you understand money? Let’s see how well you do with the following questions.
“1. Suppose you had $100 in a savings account and the interest rate was 2 percent per year. After five years, how much do you think you would have in the account if you left the money to grow? A) more than $102; B) exactly $102; C) less than $102; D) do not know; refuse to answer.
“2. Imagine that the interest rate on your savings account is 1 percent per year and inflation is 2 percent per year. After one year, would you be able to buy A) more than, B) exactly the same as, or C) less than today with the money in this account?; D) do not know; refuse to answer.
“3. Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.” A) true; B) false; C) do not know; refuse to answer.
“The correct answers are 1-A; 2-C; and 3-B.
“How did you do? Did you respond correctly to all three questions? If you did, then you belong to a surprisingly small global minority.
“In Russia, 96% of those surveyed could not answer the three questions correctly. While that might be expected of a post-communist nation, the mecca of capitalism didn’t exactly yield glowing results—only 30% of Americans aced the quiz.
“The best-performing respondents were the Germans (53% got a perfect score) and the Swiss (50%), but this still leaves almost half of each country’s population without a basic understanding of financial matters.
“In countries with relatively strong economies, the numbers are sobering: 79% of Swedes, 75% of Italians, 73%of Japanese, and 69% of French couldnot respond correctly to all three questions.”
I’m amazed and appalled by the results of that study.
Those three questions are simple. They shouldn’t require an advanced degree as prerequisite for answering correctly. An 8th grader should have enough education to answer those questions. And yet, 70% of Americans can’t answer all three simple questions correctly. That’s chilling.
The Bible warns that “My people perish for lack of knowledge.” I submit that God’s people are also impoverished for lack of knowledge.
The majority of Americans who do not understand the nature of money will be exploited, robbed and impoverished by those who do. Taking wealth from people who don’t understand the nature of “money” is truly like taking candy from a baby. Bankers and governments do it all the time. They are successful in those taking because their people are incredibly ignorant about money and currency.
Those who’d rather spend their time watching Dancing With the Stars than learning the nature of money and fundamental economics will eventually find themselves “Dancing With the Homeless” in dark alleys.
I’ll bet that the primary reason for income inequality in this country is the fact that vast majority of Americans don’t know a thing about currency except how to count it–while the top 1% have an extensive understanding of currency. Money is hard to defend if you don’t know what it is. It’s likewise easy to steal from those who are ignorant.
I’ll bet that the surest way for most people to become wealthy, is to first understand money. Without that understanding, their poverty will be all but certain. With that understanding, they’ll have a much better chance to prosper.