As my regular readers know, I am a longtime proponent of financial literacy education — it’s one of the drivers behind my writing this column and six books, and giving lectures and talks at every opportunity. The cause is important, as behavior flows from knowledge.

As the Financial Industry Regulatory Authority (FINRA) reports in its National Financial Capability Study (NFCS), those tested for higher literacy “are more likely to plan for retirement and to have an emergency fund, and less likely to engage in expensive credit card behaviors.”

The paradox is that most people believe they know more than they do.

Yet even the simplest of financial literacy tests have low results. The paradox is that most people tested in the NFCS saw themselves as knowledgeable, but test results did not bear that out.

According to the NFCS: “Despite relatively low levels of financial literacy as measured by the quiz questions, Americans tend to have positively biased self-perceptions of their financial knowledge. Most of those surveyed (76 percent) gave themselves high marks (5 to 7 on a 7-point scale where 1 = ‘very low’ and 7 = ‘very high’).”

You’ve seen financial literacy tests, I’m certain. Try out the five-question test (plus a sixth bonus question) that was used in the NFCS, above:

More work needs to be done to elevate financial literacy education. It is the foundation that makes people able to achieve financial capability — the ability to make good financial decisions — especially, in my view, when it comes to important long-term outcomes, such as retirement security.

To read the report, go to usfinancialcapability.org/downloads/NFCS_2015_Report_Natl_Findings.pdf.

TEST YOUR FINANCIAL KNOWLEDGE

1) Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have? a) More than $102; b) Exactly $102; c) Less than $102; d) Don’t know

2) Imagine that the interest rate on your savings account is 1 percent a year, and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today? a) More; b) Same; c) Less; d) Don’t know

3) If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship? a) Rise; b) Fall; c) Stay the same; d) No relationship; e) Don’t know

4) True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest over the life of the loan will be less. a) True; b) False; c) Don’t know

5) True or false: Buying a single company’s stock usually provides a safer return than a stock mutual fund. a) True; b) False; c) Don’t know

6) Suppose you owe $1,000 on a loan and the interest rate you are charged is 20 percent 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? a) Less than 2 years; b) 2 to 4 years; c) 5 to 9 years; d) Don’t know

Only 14 percent of survey respondents answered the first five questions correctly; 37 percent answered four of the first five correctly. Demographics indicated “considerable” disparity: “Males, older respondents, White and Asian respondents, and those with college or higher education levels are more likely to answer the quiz questions correctly.”

ANSWERS

1) a; 2) c; 3) b; 4) a; 5) b; 6) b.

If you want to understand the logic behind the answers, email me at readers@juliejason.com. I’ll send FINRA’s explanations to you.

Julie Jason is a personal money manager at Jackson, Grant of Stamford, Conn., and an award-winning author. Contact her at readers@juliejason.com.