Sanford Center for Financial Planning and Wellness

Sanford Center for Financial Planning and Wellness
Western Michigan University
Kalamazoo MI 49008-5420 USA
(269) 387-5720

Where do you stand?

A student is working on their Ipad in the Sanford Center for Financial Planning and Wellness Center.
How much do you really know about taxes, saving, investing, managing credit and other vital matters in your personal finances? The Sanford Center for Financial Planning and Wellness at Western Michigan University can help you increase your knowledge and skill in personal finance. 

This quiz is your own assessment of your financial knowledge. The answers will help you understand what areas of financial planning education you can pursue in order to better meet your financial goals.

Quiz source: LUSARDI, A., & MITCHELL, O. (2011). Financial literacy around the world: An overview. Journal of Pension Economics and Finance, 10(4), 497-508. doi:10.1017/S1474747211000448

Take the financial literacy quiz

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1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? (required)

That is correct!

You’ll have more than $102 at the end of five years because your interest will compound over time. In other words, you earn interest on the money you save and on the interest your savings earned in prior years. Here’s how the math works. A savings account with $100 and a 2 percent annual interest rate would earn $2 in interest for an ending balance of $102 by the end of the first year. Applying the same 2 percent interest rate, the $102 would earn $2.04 in the second year for an ending balance of $104.04 at the end of that year. Continuing in this same pattern, the savings account would grow to $110.41 by the end of the fifth year.

Incorrect.

You’ll have more than $102 at the end of five years because your interest will compound over time. In other words, you earn interest on the money you save and on the interest your savings earned in prior years. Here’s how the math works. A savings account with $100 and a 2 percent annual interest rate would earn $2 in interest for an ending balance of $102 by the end of the first year. Applying the same 2 percent interest rate, the $102 would earn $2.04 in the second year for an ending balance of $104.04 at the end of that year. Continuing in this same pattern, the savings account would grow to $110.41 by the end of the fifth year.