When it comes to financial knowledge, are you a money maven or more of a financial fledging? No matter your level of financial smarts, you can always know more. According to a recent study on financial literacy by the FINRA Investor Education Foundation, many consumers fail to grasp the basic math of inflation. Let’s take a look at the survey, take the quiz, and learn how to improve your financial know-how.
FINRA, a financial education nonprofit, shared a seven-question quiz on consumer finance to more than 25,000 adults. The results were not good: 30 percent of test-takers missed a simple question about interest rates. Two in five missed a question about inflation. An item on compound interest stumped more than 70% of consumers.
It’s time to test your knowledge. Can you answer the questions correctly?
Q1: Imagine that the interest rate on your savings account was 1% per year, and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?
- More than today
- Exactly the same
- Less than today
- Don’t know
The correct answer is C, “less than today.” If inflation is higher than the interest yield on your savings account, your purchasing power goes down over time.
Fifty-eight percent of respondents got the question right, in a quiz administered in 2024 by FINRA. The group released its finding of the quiz in April 2025 when the inflation rate was 2.31%.* To help you keep pace with rising costs, consider our Online Savings account, you’ll earn 3.00% APY** with Direct Deposit (2.00% APY without). There’s no minimum deposit or maintenance fees to eat away at your earnings.
Do you know how inflation and interest rates interact?
According to the survey, two-fifths of Americans might not understand the relationship between inflation, interest rates, and purchasing power. Not understanding how these factors are connected, could lead to you falling into credit card debt, which carries an average rate of 20%, according to Bankrate.†
Here’s another question from the FINRA quiz:
Q2: Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year, compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double?
- Less than 2 years
- 2 to 4 years
- 5 to 9 years
- 10 or more years
- Don’t know
The correct answer is B, “2 to 4 years.” At 20% interest, a $1,000 debt becomes a $2,000 debt in that span.
Only about 30 percent of test-takers answered correctly.
It’s important to understand interest rates and their impact on your loan to help avoid your debt getting so high, you’re only paying the debt’s interest and doing nothing to reduce the initial debt or loan amount.
Interest rates not only impact how much you owe, they impact how much you can earn. Knowing interest rates is a key component of any financial move. On to questions three.
Q3: Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have?
- More than $102
- Exactly $102
- Less than $102
- Don’t know
The correct answer is A, “More than $102.” More than 30% of respondents got it wrong.
While there was one question on the quiz about investing, only two-fifths of participants selected the correct answer. We offer a range of Certificates to add to your financial portfolio with terms from 3 months to 60 months earning up to 4.25% APY‡. How are you doing? Here’s question four.
Q4: True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund.
False. According to FINRA, in general, it is generally riskier to invest in a single stock, and safer to spread risk across many stocks in a mutual fund. While there are stocks that can go up in value fast, picking individual stocks versus a stock mutual fund can increase your risk of losing value. Please speak with a qualified financial advisor before making any investment decisions.
Here’s another question on the impact of interest rates. Only 25% of those surveyed answered correctly.
Q5: If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?
According to FINRA, when interest rates rise, bond prices fall. And when interest rates fall, bond prices rise. Why? As interest rates go up, newer bonds come to market paying higher interest yields than older bonds already in the hands of investors, making the older bonds worth less.
How did you do?
Nationwide, 27 percent of quiz-takers got the correct answers on at least five of seven questions. Only 4 percent answered all seven correctly. Put your financial knowledge quiz to the test by taking the full quiz here.
Final thoughts.
No matter how you did on the quiz, there’s always an opportunity to improve your understanding of finances. Here are 5 resources that can help you improve your financial know-how.
- Financial Wellness Check: Our Financial Wellness Check is a proven resource to keep you “financially healthy” by growing wealth efficiently and avoiding costly financial pitfalls. In less than 5 minutes, you can receive a personalized Financial Plan to help you build a better financial life. Start your checkup.
- Education Center: A little guidance can go a long way. Our Financial Education Center allows you to learn about money on your own terms, in your own time. This easy, practical resource can help you reach your financial goals confidently and quickly with help from expert, interactive, online modules. View the modules now.
- Financial Counselors: Our team of experienced Certified Financial Counselors are ready to listen to your unique circumstances and offer you tailored, candid practical advice. Make an appointment today.
- Money Matters: We post blogs, like this one, weekly. If you’re not already reviewing them, get in the habit. Topics cover a range of financial topics, from budgeting to saving money to taxes and scams. Read more blogs.
- Current Scams: Fraudsters never stop working to scam people out of their hard-earned funds. One of your best defenses is to know the latest scams. Make reviewing this page and our Security Center part of your monthly financial self-education program. Learn about the latest scams.
When it comes to financial knowledge, you can never know too much. Start improving your financial know-how now.
*“US Inflation Rate,” Ycharts.com. Accessed 13 May 2025.
**APY = Annual Percentage Yield. APY is the annualized rate based on a compounding period of one year. When the deposited money earns dividends and the accumulated dividends starts earning dividends as well, we are talking about compounding. Fees could reduce the earnings on an account. All yields except Certificate yields are subject to change retroactively to the beginning of the month.
Rate bonus is for a minimum of $1,000 monthly ACH Direct Deposit or Agent Net Check into a Farmers Insurance Federal Credit Union Checking Account. Rates are subject to change at anytime.
No branch or call center access with this account.
The national average for this type of account is 0.42% APY, based on rates published in the FDIC Monthly National Rates and Rate Caps accurate as of 01/21/2025.
†Rossman, Ted, “Current credit card interest rates.” Bankrate.com. Published 8 May 2025. Accessed 13 May 2025. https://www.bankrate.com/credit-cards/advice/current-interest-rates/
‡Limited Time Offer No Penalty 9-Month Certificate Account / Yields are subject to change without notice. This is a promotional yield of 4.25% APY. Bonus Dividend may not be combined with any other dividend increase/bonus. Annual Percentage Yield (APY) is calculated on a 4.17% base rate, $1,000.00 minimum balance, regular share certificate requirement on a 365 day basis. IRA share certificates do not qualify for this promotion. Deposit must be new funds to the Credit Union and may not be transferred or withdrawn and deposited back into the Credit Union from any existing Credit Union account. No additional deposits accepted (other than dividends) during certificate term. Normal substantial penalty for early withdrawal of certificate funds will be waived as follows: 1) No withdrawals within the first 30 days of setting up the certificate 2) One withdrawal allowed per calendar month after the initial 30 days no withdrawal. Fees and other conditions may reduce earnings. The 9-Month promotional No Penalty Certificate will automatically roll over to a 9-Month Certificate at maturity. Federal regulations require dividends be paid from available earnings; dividends are contingent upon this regulation. Refer to our TISA Disclosure for terms and conditions. *APY = Annual Percentage Yield. Rates and terms are subject to change at any time. Fees could reduce the earnings on an account. No Additional deposits are allowed. No withdrawals prior to maturity date subject to terms; penalties will be waived after the first 30 days.
