The Financial Times recently released an article highlighting that nearly three-quarters (73%) of the UK fall below the financial literacy benchmark. This is quite shocking and could mean that the trend of people suffering from financial stress is likely to increase over time unless something changes.

From the data, younger people did significantly worse than older people. This is not overly surprising as most are never taught about money in school and haven't had the opportunity to benefit from many life experiences.

The most interesting statistic from the study was that the savings rate of those that scored well was much higher than that of that who didn't score so well.

This suggests that there is a link between greater financial understanding and financial wellness.

This is great news if you are teaching your kids about money now!

Sadly, I can't find the exact questions asked as part of the study mentioned in the Financial Times. However, I have found 5 questions which have been used in similar studies before. I have put these below so you can test yourself and your kids.

After you've had a go at the Money Quiz, you can check your answers. By the end of this blog, you and your kids will be financially smarter than three-quarters of the UK population!

**The Money Quiz - Questions**

**Question 1: Suppose you need to borrow ****Â£****100. Which is the lower amount to pay back? **

A: Â£105

B: Â£100 plus 3%

**Question 2: S****uppose over the next 10 years the price of the things you buy doubles. If your income also doubles, will you be able to buy:**

### A: Less than you can buy today B: The same as you can buy today C: More than you can buy today

**Question 3: Suppose you had**** ****Â£100**** in a savings account and the bank adds 10% a year to the account. How much money would you have in the account after five years if you did not remove any money from the account?**

A: More than Â£150 B: Exactly Â£150 C: Less than Â£150

**Question 4: Suppose you put money in the bank for two years and the bank agrees to add 15% per year to your account. Will the bank add more money to your account in the second year than the first year, or will it add the same amount in both years?**

A: More B: The same

**Question 5: Suppose you have some money. Is it safer to put your money into:**

A: One business or investment B: Multiple businesses or investments

**The Money Quiz - Answers**

**Question 1: Suppose you need to borrow ****Â£****100. Which is the lower amount to pay back? **

A: Â£105

**B: Â£100 plus 3% (Correct)**

Percentages are notoriously difficult for many people but a useful skill to learn when it comes to money.

There are probably lots of ways of learning percentages and I'm certainly not a maths teacher. However, for myself and my kids, I always start by calculating 'What is 1%?' and then multiplying that amount. In this example, to get to 1% we need to divide the Â£100 by 100, which gets me to Â£1. Then I simply multiply by 3 (as it is 3%) to get to Â£3. I then add to the Â£100 so we have Â£103 (which is less than Â£105).

**Tip:** Remember that you can swap % around and get the same answer. For example, 8% of 25 seems hard but it is the same as 25% of 8 which is 2!

**Question 2: S****uppose over the next 10 years the price of the things you buy doubles. If your income also doubles, will you be able to buy:**

###
A: Less than you can buy today
**B: The same as you can buy today ****(Correct)**
C: More than you can buy today

This is a very timely question as it is focusing on inflation (the price of things you buy increasing).

Let's use an example for this question. Suppose you earned Â£1,000 per month 10 years ago, and a Big Mac cost Â£2. You would have been able to buy 500 Big Macs per month then (1000 / 2 = 500)!

Now, 10 years later, you earned Â£2,000 per month. You might be thinking that you are richer and could buy lots more Big Macs compared to 10 years ago. However, if the price of Big Macs is now Â£4, this means you can still only afford to buy 500 Big Macs (2000 / 4 = 500)

This is an important lesson as everyone might assume they are getting richer over time as they see their earnings increase, savings in their bank accounts earn interest or their house price go up. However, if earnings, interest on savings or house prices don't go up as much as the price of the things you buy, you get poorer due to inflation.

You can help your kids learn more about inflation by reading my blog: How to teach your kids about Inflation

**Question 3: Suppose you had Â£100 in a savings account and the bank adds 10% a year to the account. How much money would you have in the account after five years if you did not remove any money from the account?**

**A: More than Â£150 (Correct)**
B: Exactly Â£150
C: Less than Â£150

This question is all about Compound Interest. This again uses percentages.

Many people select B (exactly Â£150) as they calculate 10% of Â£100 (which is Â£10) and multiply that by 5 years. However, at the end of the first year, they would have Â£110 in their savings account. In the second year, they would earn 10% on Â£110 which is Â£11 (not Â£10). Therefore, they'd have Â£121 in the savings account at the end of two years.

Year 3: They'd earn Â£12.10 in interest so have Â£133.10 (Â£121 + Â£12.10) in savings

Year 4: They'd earn Â£13.31 in interest so have Â£146.41 (Â£131.10 + Â£13.31) in savings

Year 5: They'd earn Â£14.64 in interest so have Â£161.05 (Â£146.41 + Â£14.64) in savings

This shows that they'd have Â£161.05 which is 'More Than Â£150'. Essentially, you earn more money each year as you earn interest on the interest you made in years before.

Whilst knowing the numbers is a good thing to know, the most important thing is that your kids understand that if they keep their money in a savings account or investment account, over time, the amount they make each year is expected to increase.

Help your kids learn this important topic by reading my blog: How to teach your kids about Compound Interest:

**Question 4: Suppose you put money in the bank for two years and the bank agrees to add 15% per year to your account. Will the bank add more money to your account in the second year than the first year, or will it add the same amount in both years?**

**A: More (Correct)**
B: The same

The people who came up with this quiz believe that understanding Compound Interest is a really important topic as this question is also about it!

This is slightly more tricky from a numbers point of view but follows the same principles.

If we started with Â£100, at the end of the first year you would have earned Â£15 (as 1% is Â£1 and then we multiply by the percentage number (15)).

This means at the end of the first year you would have Â£115 in the account.

In the second year, you would earn interest of 15% on that Â£115 in the account. So you would earn MORE than in the first year. You'd earn Â£17.25 (15% of Â£115) in the second year.

Again, if you aren't already, please start teaching your kids about Compound Interest. As the saying goes:

Those that understand it, earn it ... those that don't, pay it!

Whilst the questions are focusing on earning interest in a bank account, it's really important (if not, more important) to understand that if you borrow money (use debt), then the amount you have to pay back each year in interest could increase due to compound interest.

**Question 5: Suppose you have some money. Is it safer to put your money into:**

A: One business or investment
**B: Multiple businesses or investments (Correct)**

I love that they included this question as it is all about investing and risk.

This is all about probabilities. If you put your money into one business and that business does badly then you could lose a lot of money. If you put your money into two businesses, then the chances that both companies do badly are less likely than just one of them. As you invest in more and more businesses, the chance of them all doing badly reduces significantly, which reduces the chances of losing a lot of money.

This is best explained using Blockbuster Video and Lego which you can read in my blog: How to teach your kids about the Stock Market

**Summary**** **

I hope you and your kids managed to get at least 3 out of 5 of those questions correct.

Whilst learning about money is important, the key to financial wealth and happiness is putting knowledge into action. This means helping your kids form amazing money habits from a young age. Hopefully, by the time they are adults, they will be following the Three Rules of Wealth.

Thanks for reading and don't forget to share and subscribe below.

Will

Useful link: Age-by-age guide to raising wealthy kids

**p.s.,** remember that teaching your kids about money doesn't have to be boring. Help them learn about money using stories with a copy of Grandpa's Fortune Fables, available on Amazon or as part of my __S__** PECIAL BUNDLE OFFER** with games, worksheets, the Money Tracker, and an online course for you. (If you have already read the book, it would be amazing if you could

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