Millennials are more likely than boomers to misunderstand these financial issues
With age comes financial wisdom.
Or so it seems from a recent survey of more than 2,300 adults released by Wells Fargo, which asked both millennials (ages 20-36) and boomers (ages 53-71) a set of basic financial questions. Boomers, overall, did better than millennials. Here’s a look at the questions and what they scored.
Which of the following statements describes the main function of the stock market?
A) The stock market brings people who want to buy stocks together with people who want to sell stocks.
B) The stock market helps predict stock earnings
C) The stock market results in an increase in the price of stocks
D) None of the above
E) Not sure
The correct answers is A, and 44% of boomers got it right, compared to just 39% of millennials. What’s more, many millennials — rather than answering that they didn’t know — got the question wrong. Fully 17% answered B (compared to just 6% of boomers) and 11% answered C (versus 4% of boomers).
If 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?
A) Exactly $102
B) Less than $102
C) More than $102
D) Not sure
The right answers is C, “more than $102.” Fewer than three in four millennials got that right (73%) compared to more than eight in 10 boomers (82%). The second most popular answer for millenials was “exactly $102” (10% said that versus 3% of boomers).
If 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?
A) More than today
B) Exactly the same as today
C) Less than today
D) Not sure
Fewer than half of millennials got this question right (40%) — the correct answer is “less than today” — compared to 73% of boomers.
Which provides a safer return, buying a single company’s stock or a mutual fund?
A) Single company’s stock
B) Mutual fund
C) Not sure
About half of millennials answered this question correctly (51%) — the correct answer is “mutual fund” — compared to two-thirds of boomers.
The reason more boomers correctly answer these questions, as compared to millennials, is likely because they have many more years of saving and investing experience than their millennial counterparts. And frankly, neither age group is particularly adept at financial literacy: One study showed that two-thirds of Americans would not pass a basic financial literacy test.
© 2017 Dow Jones & Company, Inc. All Rights Reserved