Only one in five young adults can answer three basic financial questions correctly, according to a Swedish study. At the same time, half of the study’s participants reported having financial problems themselves.
A study conducted by the Department of Psychology in Lund, Sweden, asked 2050 young adults aged 18-29 to answer questions about their financial situation, their psychological well-being and questions about economics, in order to see how well young people are able to manage their own personal finances. Participants were asked three quick and basic questions about inflation, interest rates and risk diversification, in other words, things that are important to keep track of for good household finances.
Around 20% answered all the questions incorrectly and around 20% answered them correctly. At the same time, two-thirds of all participants answered the question about inflation incorrectly.
– Financial literacy is a basic skill that every person should have in order to survive and thrive in society, says Henrik Levinsson, senior lecturer in psychology at Lund University, in a press release.
“Alarming” lack of knowledge
Women were more likely to have fewer correct answers and were more often unsure than men. At the same time, half of all participants stated that they themselves had some form of financial problem, and a quarter stated that they had taken out consumer loans. 10 per cent also responded that they had turned to the municipal budget and debt counselling service for help.
The researchers say that the lack of knowledge is “even more alarming today given how easy it is to take out SMS loans”.
– It is highly urgent that we start talking more about “financial health” and how the risk of over-indebtedness early in life can be reduced. In particular, schools have a key role to play in teaching more about personal finance, an issue that is highly topical and has been highlighted both nationally and internationally, says Levinsson.
The next step is to follow individuals over time to better understand the links between financial ability, personal finances and mental health.
The questions the researchers asked:
Question 1: Suppose you had SEK 100 in a savings account and the interest rate was 2 per cent per year. After five years, how much do you think you would have in the account if you let the money grow?
a) More than SEK 102
b) Exactly 102 Swedish kronor
c) Less than SEK 102
d) Don't know
Question 2: Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After one year, how much would you be able to buy with the money in this account?
a) More than today
b) Exactly the same
c) Less than today
d) Don't know
Question 3: Is the following statement true or false? "Buying shares in an individual company usually provides a more secure return than an equity fund."
a) True
b) False
c) Don't know
Source: Forskning.se
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