Accountancy Resources
When it comes to making money, everyone wants a shortcut. Just google “get rich quick” and you’ll see thousands of answers promising an easy solution to financial freedom.
But, what if I told you that the National Bureau of Economic Research—with professors from the University of Pennsylvania, George Washington University, and North Carolina State University—released a study that promises just that: An easy solution to get rich quickly.
Don’t believe me?
The study, titled “Financial Knowledge and 401(k) Investment Performance”, found that people with a higher financial knowledge see greater long-term investment gains.
Those with the highest level of knowledge gained an average of 9.5% per year while those with the least gained just 8.2%.
While a 1.3% gap may not seem like much, that adds up to more than 25% over a 30-year career. Talk about more financial freedom.
How did the study assess an individual’s financial knowledge? By asking 5 simple questions:
So, how did you do?
The research showed that few Americans can answer even just the first three questions correctly.
“The first measures people’s ability to do a simple interest rate calculation,” the study says. “The second test people’s understanding of inflation; and the third is a joint test of knowledge about ‘stocks’ and ‘stock mutual funds as well as risk diversification since the correct response requires the respondent to know what a stock is and that a mutual fund is comprised of many stocks.”
Here are the correct answers by the way:
Knowing the answers to these five questions has a fairly direct correlation to having 25% more money when you retire. It’s one “get rich quick” idea that actually works.
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