Economist Annamaria Lusardi, a world-expert on financial literacy and professor at George Washington University, ran several studies which all concluded that the level of financial literacy among young adults, but also people with an academic background, is still lacking.
In these studies, she asked participants three basic questions, which have come to be known as “The Big Three” in financial literacy research:
1) How much money will you have in your account after five years if you neither deposit nor withdraw money during that time?
2) Suppose the interest rate on your savings account is 1% and inflation is 2%. How much can you buy with your money in your account after one year?
3) Is it riskier to invest money in one investment or in several investments?
The rather surprising – and somewhat scary – findings of her research are that even in countries with very developed financial markets, for example the US, Germany, the Netherlands, or Switzerland, the level of financial knowledge is still low. And many participants are not able to answer these questions correctly.