Surveys show that Americans still have a relatively poor understanding of basic money concepts, what experts call financial literacy.
Our lack of money knowledge is not because we're a bunch of dummies. The financial world has grown increasingly complex, and we're responsible for more money decisions.
With the help of money experts and financial literacy organizations, we developed a money quiz that might contribute to your understanding of money topics:
Would you rather have $1,000 or a penny doubled every day for a month? The lump sum of a grand is nice, but a penny doubled every day yields nearly $11 million if the month has 31 days. That shows the power of compounding, which is why savings grow quickly over time, though, granted, not as fast as a daily-doubled penny.
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Do your credit scores rise when you get a higher-paying job? No. Credit-scoring models don't care whether you're a millionaire or living paycheck to paycheck. They care only about whether you use credit and use it well. "Your income is not on your credit report, so it's systematically impossible," said John Ulzheimer, president of consumer education at SmartCredit.com.
Is a household budget meant to restrict your spending? Not necessarily. A budget can allow you to free up money to spend on things you care about, even fun things. Tracking spending and budgeting are about telling your money what to do instead of wondering where it went.
Should a child's weekly allowance be tied to household chores? There's no single correct answer here, and parents are free to design any allowance system they like. However, many experts advise parents to keep allowances separate from chores.
One reason is it can confuse the lessons. Allowance is about teaching children to spend, by encouraging them to make choices, compare prices, run out of money and make spending mistakes. Teaching about earning money is important, too, but it's an entirely different lesson.
Should I pay off highest interest rate debt first? It depends. Mathematically, using extra money to pay off high-rate debt, such as credit cards, makes sense. But if you have different debts, you might get a psychological boost by wiping out several smaller debts first.
What is the only official site for getting your credit report? AnnualCreditReport.com. Don't be fooled into signing up for a credit-monitoring service to get your report at a different site. You're entitled to one free report annually from each of the three main credit bureaus: Experian, TransUnion and Equifax.
They have largely the same information, so if you access one every four months, you can keep regular tabs on your credit.
The point is to review the credit report for accuracy and dispute any inaccuracies that might be hurting your ability to get credit or borrow at the most favorable rates.
Which investment is likely to provide the highest returns over time: stocks, bonds or certificates of deposit? Historically, stocks have provided the highest returns over long periods, especially if you're talking about decades. However, most financial advisers suggest a mix of stocks and relatively safer bonds, with the mix getting more bond-heavy as you approach the time you'll need the money.
True or false: You must buy eyeglasses and contact lenses from an eye doctor. False. Federal law requires your eye doctor to give you your prescriptions so you can buy corrective lenses anywhere. But customer-satisfaction surveys show that consumers often are more satisfied with the service they get from their eye doctor than from other sellers.
What is the form that discloses how financial advisers are paid? Form ADV. Starting this year, Part 2 of the form must be a brochure written in plain English that describes the types of advisory services offered, the adviser's fee schedule, disciplinary information, conflicts of interest, and the educational and business background of management and key advisory personnel of the adviser, according to the Securities and Exchange Commission.
Which is more expensive for a family of four: food or financing a new car? Food costs more, unless you're talking about an especially pricey car. The American family of four spends about $8,700 on food in a year, or $725 a month, according to the most recent government Consumer Expenditure Survey.
That's far more than most monthly car payments. People will research for months to get a good deal on a car, but many won't look at a sales flier or clip a few coupons. Small, repeated purchases matter.
How many credit scores do you have? Many. Most credit scores used by lenders are based on the FICO brand of scores, but they're often customized. For example, an auto lender might use a modified score that's different than one used by a mortgage lender.
How large should your emergency fund be? Three to six months of bare-bones living expenses, most money experts advise.