Westport News: In a test of financial ABC's, we get a C

The results are in from a nationwide survey that measured what Americans know about rudimentary finance.

And for a state that is among the nation's most educated and most wealthy, Connecticut doesn't have much to brag about.

At the end of last year, findings of the nation's first State-by-State Financial Capability Survey were released by its sponsor, the Financial Industry Regulatory Authority.

If you visit the survey's website -- www.usfinancialcapability.org -- you'll find a map you can click on to compare the financial capabilities of Americans in each state. More than 28,000 respondents were surveyed in concert with the President's Advisory Council on Financial Literacy.

Part of the study asked participants five questions involving concepts of economics and finance encountered in everyday life. Read the questions that follow, and quickly jot down your answers While you're at it, have your kids take this quiz, too. (Answers are at the end of this column.)

1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, would you have more than $102, exactly $102 or less than $102?

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?

3. If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same or there is no relationship?

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.

5. True or false: Buying a single company's stock usually provides a safer return than a stock mutual fund.

For each state, the results were compiled to detail the average number of questions respondents answered correctly, incorrectly and checked "don't know."

Here's how Connecticut's averages stacked up with national averages:

Connecticut:

Correct: 3.0

Incorrect: 0.8

Don't Know: 1.2

U.S.

Correct: 3.0

Incorrect: 0.7

Don't Know: 1.2

I know you're thinking the math is off (there are five questions, yet Connecticut adds up to 6; the U.S. to 5.9).

While I haven't yet heard back from FINRA with their explanation, spending time on that question really just delays the main point -- that we here in Connecticut are just average. Bummer!

Most of us don't like to think of ourselves as average. I remember the grade of "C" being average. That doesn't seem good. But the powers-to-be at FINRA seem to think we are just that -- mediocre.

Of particular concern are the results for Connecticut's younger respondents. The age 18-34 demographic scored as follows:

Correct: 2.4

Incorrect: 1.1

Don't Know: 1.5

Hmmm. What does this tell us? Oh yes, it says I get to keep this writing job, as the need for teaching kids about money has never been more apparent.

The study went on to assess financial capability (beyond the financial knowledge and decision-making questions we've just discussed).

Residents of New York, New Jersey and New Hampshire (must be something about states starting with the word "New") are the most financially capable. But don't worry, if you have any friends in Kentucky or Montana, you still maintain bragging rights over those folks.

I would highly recommend you visit the survey website -- www.usfinancialcapability.org -- and take a look at the results. They've been sliced-and-diced in various formats that you'll find interesting. And for those of you who want a little remedial work I'll start sharing some helpful websites in coming weeks to get you going,

Answers to the quiz in this column:

1. More than $102

2. Less than today

3. Fall

4. True

5. False