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Most older Australians can’t answer these 3 simple investment questions. Can you?

(Photos: Getty)

It’s the three questions about investing that stumped more than nine in 10 Australians aged over 55.

Bond University associate professor of statistics Adrian Gepp asked the following three questions to 3400 Aussie seniors, and less than one in 10 got them all right. Can you answer them?

Questions

Question 1: Which of the following investment options do you think is most likely to lead to a loss of money over a one-year period?

(A) Conservative/Cash

(B) Growth/High Growth

(C) Balanced

(D) Don't know

Question 2: Which of the following investment options do you think is least likely to lead to a loss of money over a one-year period?

(A) Conservative/Cash

(B) Growth/High Growth

(C) Balanced

(D) Don't know

Question 3: If you had a choice between receiving $10,000 now, or a greater amount of money one year from now, what is the minimum amount you would need to receive in one year in order for you to choose this option instead of $10,000 now?

Answers

Question 1: (B) Growth/High Growth

Question 2: (A) Conservative/Cash

Question 3: Varies depending on financial circumstance, but at least $10,250*.

‘Dangerous levels’

If you got all three right, you’re smarter than 93 per cent of baby boomers, of whom one in three got all wrong.

The results indicate “dangerous levels” of financial literacy among Australians, Gepp said – and it has consequences for your nest egg.

“People tend to be overconfident of their financial knowledge and skills,” he said.

“Financially illiterate people are more likely to experience asset loss and outlive their savings after retirement.”

Family members of older Australians should speak to them about their financial position and decisions, Gepp added.

“Don’t assume they know what they are doing and make sure you check to see they are managing their finances appropriately.”

At most risk of making poor financial decisions are women, as well as those who were unmarried, suffered from poor health, and the most elderly.

Government efforts to raise financial literacy

In August last year, the then-financial services and revenue minister Kelly O’Dwyer launched the National Financial Capability Strategy aimed at pulling together government, business, not-for-profit and education organisations to better inform and support Aussies.

“We want all Australians to be in control of their financial lives,” O’Dwyer said at the time.

“People are making choices about their money everyday. If Australians are in control of their financial lives today, they will have a better future for themselves and for their families tomorrow.”

The aim of the Strategy is to help Australians with their day-to-day money management, decision-making and future-planning.

*Note: The $10,250 figure is calculated from factoring in inflation as well as allowing for a buffer, according to Gepp. Additionally, as circumstances vary, a broad range of answers were accepted in the survey, he told Yahoo Finance. Most Australians who were with a basic savings account with a Big Four bank would be earning interest in the low 2 per cent range, meaning a figure upwards of $10,250 would be needed to make that option preferable.

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