If you read this website, you hopefully know what a 401(k) is. But more than one-third of Americans — 37 percent — don’t recognize the popular retirement plan, according to GOBankingRates’ recent nationwide survey of more than 500 people.
Survey respondents didn’t do much better — or did even worse — on the rest of the questions. As GOBankingRates concludes:
“Across all questions, roughly half to two-thirds of respondents answered correctly, meaning there is a sizable minority of people who never learned some basic money skills.”
This poor performance is perhaps especially concerning considering the questions were multiple-choice. Respondents were polled about six basic financial concepts, with four to six multiple-choice answers to choose from for each concept.
The concepts and correct responses are:
- CD: 68 percent of survey respondents chose the correct term corresponding to this abbreviation — “certificate of deposit.”
- 401(k): 63 percent chose the correct description — “retirement savings vehicle.”
- Net worth: 59 percent chose the correct definition — “value of someone’s assets minus their liabilities.”
- HELOC: 59 percent chose the correct term corresponding to this abbreviation — “home equity line of credit.”
- Major credit bureaus: 65 percent chose the correct three companies — Equifax, Experian and TransUnion.
- Credit score: 60 percent knew that income does not affect your score.
In some cases, it’s perhaps understandable to not fully grasp a concept. For example, not everyone works for an employer that sponsors a 401(k) plan — although an estimated 79 percent of us do. And some folks either don’t have home equity to tap or make it through life without needing a HELOC.
But credit is a financial topic that affects all consumers, impacting multiple aspects of their lives. Everyone from your mortgage lender or landlord to your employers is liable to pull your credit score and judge you based on it.
“Your credit is super important to your overall financial health for at least three reasons. First, bad credit means you pay higher interest rates when you borrow. Second, it can impact other expenses … And, finally, it can hurt your ability to find work ….”
If your credit knowledge — or credit score — is lacking, check out:
- “10 Key Facts to Test Your Credit Card IQ“
- “12 Surprising Ways to Wreck Your Credit Score“
- “Boost Your Credit Score Fast With These 7 Moves“
If you don’t know where your credit score stands, you’ll also want to read:
What do you make of the state of America’s financial literacy? Sound off below or on our Facebook page.