Most Americans cannot pass this financial literacy quiz - can you?
- Ben Clarke
- Nov 20, 2025
- 3 min read
Not personalized financial advice - your money, your choice
27%. That’s how many Americans passed on a basic 7-question financial literacy quiz put out by the Financial Industry Regulatory Authority.
That means that roughly 3/4 Americans aren’t financially literate if we use this quiz as a gauge.
Coincidentally, the content in this quiz covers the most asked questions surrounding investing and personal finance.
In this article, I’m going to cover what you need to know to hopefully be in the top quartile of Americans when it comes to financial literacy (the link to quiz is at the end of this article if you want to get a baseline):
Compounding interest with debt.
Interest in the form of investment returns.
What happens to your money when you use a savings account?
People, in general, struggle to understand percentages when it comes to compounding interest and inflation. Both of these concepts utilize exponential growth, which, for most of human existence, has not been a significant concern that required attention.
For the most part, we haven’t even had access to an exponential amount of people, food, or resources.
Food has also only become abundant in the last 100 or so years, and even our food supply is not growing at exponential rates.
The only thing I can think of that grows exponentially is bacteria, yeast, and viruses - all of which we can’t see with our naked eye. Even that kind of exponential growth hasn’t been something that we have to think about for most of human existence, unless you’re a chemist or a biologist or a cheese maker.
Compound interest can be pretty cool, especially when it’s used to make cheese with bacteria, but it quickly gets scary when it comes to credit card debt. For reference, many modern-day credit cards have interest rates from 26%-28% with the occasional card having a relatively ‘cheap’ 20% interest rate.
This means that if you don’t pay off a $1,000 balance by the due date, it starts accruing interest, and after a year at a 20% annual interest rate, you’d owe $1,200, and after just 4 years, you’d owe more than $2,000.
The way that I remember this is by thinking of this as the rate of doubling.
If you were to cut that interest rate in half, you’d get a generously estimated return of the S&P 500. At a 9-10% return, a $1,000 investment would take about 8 years to double. So roughly half the interest and 2x the time to double.
That said, this rate of doubling scales. So invest $1,000,000 at a 9-10% interest rate and you’d end up with about $2,000,000 after 8 years - pretty neat!
Even with interest rates working in your favor, if they’re too low, they can work against you. The classic example is a traditional savings account. In the U.S, most people have access to a savings account through their bank (if they’re lucky, it's a High-Yield Savings Account; HYSA). These accounts typically earn less than 1% per year.
So, if the rate of inflation is 2% per year, are you losing or gaining buying power? If you said losing, you’d be correct.
Even if your $1,000 turns into $1,010 throughout the course of a year, if inflation is at 2%, that $1,010 is more like $990 in terms of what it can buy, on average.
It’s a bit like watching a snowman melt in the yard.
To recap, we covered:
How debt can explode
How interest can work in your favor (when investing)
How savings accounts can be tricky
Hopefully, these help you get closer to passing the financial literacy quiz from FINRA. If you want to take the quiz, here is the link: https://www.finra.org/financial_knowledge_quiz
If you learned something, consider subscribing to the YouTube channel or newsletter, and let me know how well you did on the financial literacy quiz!
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