A new test given as part of the Aegon Retirement Readiness Survey, about the financial literacy of people worldwide, has produced some alarming, yet not that surprising, results. It should be of no surprise that people globally don’t really understand some of the central tenants to global monetary policy, nor do they understand some of the key concepts about retirement. This was revealed in a recent Bloomberg article published today, which states that "Many of the participants failed the quiz, with big potential consequences for their future security."
Here's the quiz in its entirety.
The first alarming problem is that the average every day investor doesn’t seem to understand the difference between a stock and a mutual fund. When asked which of the two were the riskier financial instrument, only 45% of people around the world knew the answer - that's less than half. Bloomberg wrote:
But before we get to that, take a look at this question—only 45 percent of people around the world got right:
Q. Do you think the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.”
The possible answers? True, false, do not know and refuse to answer.
Sixteen percent of people got it wrong. “Do not know” was chosen by 38 percent. In the U.S., 46 percent of workers got it right. Good for you, America. (The answer, in case you were wondering, is false.)
Also, it is a little to no surprise that the average middle-class worker doesn’t seem to understand how inflation works or how it affects their ability to purchase goods. This may explain Central Banks' obsession with manipulating it and using it as a tool to further their spending agendas. The article continued:
It was an inflation question that had the highest percentage of wrong answers, however. More than 20 percent of workers didn’t grasp how higher inflation hurts their buying power. Given that declining health was the most-cited retirement worry, at 49 percent, and healthcare is an area (in the U.S., especially) with high cost-inflation, well, that makes the subject something older folks should have down cold.
Despite the lack of understanding, making fiscal sense remains a major concern for people heading toward retirement. The survey also queried participants regarding what their biggest concerns were as they approached retirement. "Running out of money" came in second, only to "declining physical health".
Despite not understanding the core principles of the government's monetary policy, participants in the survey seemed to be sure that the government benefits offered for retirement were crucial to a comfortable retirement. As the government takes with the hand of inflation, it gave survey participants a warm and comfortable feeling with the other hand that spends on their retirement benefits.
The survey asked workers—about 1,000 per country—what global trends would affect their retirement plans....