Free financial survey questionnaire to booster your monetary self-awareness

Financial survey questionnaire - personal finance

Answering a financial survey questionnaire is an excellent way of assessing the areas of personal finances you are good at, and the ones you need to improve.

  • A financial survey questionnaire is the first step to understand our personal finance gaps. From college students to young adults and mid-career Millenials, we are all being increasingly put in charge of our financial security after retirement. This financial survey questionnaire has helped me to access my financial knowledge strengths and weakness.
  • There is a vast number of financial products to choose from and little guidance on how to do so. If we are to take charge of our economic future, we must have the proper monetary self-awareness to do so. This is why choosing a financial literacy quiz is so essential. A financial survey questionnaire can help you understand your personal finance strengths and weakness.
  • I have used this financial survey questionnaire to evaluate my own monetary self-awareness strengths and weakness. This is my plan on how to improve my personal finances skills by studying a colossal quantity of authentic financial knowledge

Leveraging the value of the Financial Survey Questionnaire:

  1. Answer the 16 questions

    Answer all questions truthfully. If you do not know the answer, don´t guess., just answer I don´t know. This way you will keep track of the topics you need to improve on.

  2. Take note of your score

    Check your score and take not of the topics you need to improve one.

  3. Check the answers

    I have included in this post a detailed answer for each one of the questions.

  4. Continue improving

    Check how I improved my financial literacy by studying from a colossal quantity of authentic financial knowledge.

No e-mail, no subscription, no log-in.

Just well-engineered personal finance questions to evaluate your financial knowledge. 16 questions, 5 minutes.

Follow this link to start the personal finance questionnaire in a new tab

Where can the financial survey questionnaire take you from here?

Let’s check the result of the financial survey questionnaire and verify how these questions relate to your life.

Basic personal finance questions

The first five questions of the financial survey questionnaire cover economic fundamentals. This first set of questions aims to assess your basic financial literacy. They cover topics ranging from the working of interest rates and interest compounding to the effect of inflation, discounting, and nominal versus real values.

Question 1 – Numeracy – The ability to use mathematics in everyday life.

The first question is also an easier one. About 91% of the respondents get it right. The importance of numeracy on personal finances cannot be understated. It’s not about being good with maths or knowing advanced calculus. It’s about translating the basic mathematics knowledge to your day to day life..

Numeracy involves skills that aren’t always taught in the classroom – the ability to use numbers and solve problems in real life. It means having the confidence and skill to use numbers and mathematical approaches in all aspects of life.

If you want to take a more comprehensive test on numeracy. You can try the UK National Numeracy Challenge. It took me a good thirty minutes, a calculator, and some patience to score 98%. The test is free, but you will have to register to have access to it. Once I finished the test, I had to input my gender, age, and location to see the results. This last part I think was unnecessary, they could have asked for all the information from the start.

Question 2 – Interest compounding – The recipe to make you wealthy (or poor)

About 76% of people get this question right. That’s quite a drop from 91% on the first question. And the concept around it is not that different.

Interest compounding is the beating heart of investing, it is the enabler to build wealth in the long run. It is the critical tool of anyone joining the world of personal finances. It is also the principle that multiplies your credit card and student loan debt. That is why it is so important to understand interest compounding! You can get rich or poor because of it.

Compound interest is what makes an investment of $200 a month at 5% a year to become $82.000 in 20 years. That is $48.000 of investment and $34.000 of interest! Turn this 20 years into 30, and you have $160,000.

There are countless interest compounding calculators around. The best I have seen so far is from Calculate Stuff. No registration, no ads, just a sound, and an easy interface to calculate compound interest.

Making plans for long term savings

It is easy to get carried away on ideas for long term savings. There are two crucial things to take into consideration when doing such calculations:

  1. What interest rate should you use? The percentage used here should reflect the average net returns of your investment portfolio. It is important to emphasize that we are talking about net returns, meaning your average portfolio returns minus taxes, fees, and inflation. This will depend heavily on your risk appetite and on the country you are investing in. A good rule o thumb for a moderate portfolio is from 5 to 7% a year.
  2. It is not easy to have a lot of cash in the bank. Most people usually underestimate how hard it is to have a lot of money in the bank until it is too late. There is a reason people don’t save 200 dollars a month for 20 years. At some point in the way, you end up deciding to buy a second car. Or even a countryside property, a boat, or something else that at the time seems like a great idea. If you are making any long term saving plan, ensure to understand compound interest. But at the same time, make sure you know yourself first.
Financial survey questionnaire - personal finance

Question 3 – Inflation – Where did my money go?

Inflation is not a strange concept for most. In the present financial survey questionnaire, 83% of the participants answered question three correctly.

Inflation represents the increase in prices of goods and services over a period of time. That means that with inflation, over time, money it’s value. Very high inflation rates are usually caused by the supply of money growing faster than the economy.

Although we usually tend to see inflation as a bad thing, it is something needed for economic stability. Most economists favor a low and steady rate of inflation. Low, as opposed to zero or negative inflation, reduces the severity of economic recessions. It does that by enabling the labor market to adjust more quickly in a downturn and minimizes the risk that a liquidity trap prevents monetary policy from stabilizing the economy. You can find a good article about inflation at Wikipedia.

Below you can see the inflation worldwide as provided by the World Bank.

Question 4 – Time Value of Money

Question four is the hardest so far, only 72% get it right, and it is related to the time value of money, or TVM.

The time value of money states that any money that is available now is worth more than the identical sum in the future. Money that is available now has a potential earning capacity, meaning that the provided money can earn interest if invested. Time value of money, therefore, accounts for the opportunity gain of having the money now as opposed to later.

In addition to the opportunity cost, by receiving the money later, you are incurring inflation, meaning that your purchase power today tends to be higher than in the future. Finally, by delaying the payment, there is an increase in the default risk.

Question 5 – Money illusion

Another difficult question from this financial survey questionnaire, only 72% get this one right. Although not commonly discussed, money illusion is a critical personal finance topic that must be well understood.

Money illusion proposes that people have a tendency to view their wealth and income in nominal terms, rather than recognize its real value, adjusted for inflation. The face value (nominal value) of money is mistaken for its purchasing power (actual value) at a previous point in time. Viewing purchasing power, as measured by the nominal value, is false. As modern fiat currencies have no intrinsic value, and their real amount depends purely on the price level.

Advanced personal finance questions

The second set of questions aims to measure more advanced financial knowledge and covers topics such as the difference between stocks and bonds, the function of the stock market, the working of risk diversification, and the relationship between bond prices and interest rates. Risk management in personal financial planning is a key element of personal finances and understanding the topics of the advanced questions below you take you closer to your financial freedom.

Question 6 – The function of the stock market

Everyone has heard about the stock market, many people talk about it. If you turn on the news, it is hard to go by without it being mentioned at least once. Nevertheless, when asked about what is the function of stock markets, only 67% get it right.

In simple terms, the stock market is the aggregation of buyers and sellers of stocks.

stock exchange, on the other hand, is a regulated marketplace that connects buyers and sellers of diverse financial securities such as stocks, bonds, and warrants. In other words, it is the physical place where the trade takes place. Stock exchanges date back more than 400 years. The first stock exchange was established in Amsterdam in 1602 to trade shares of the Dutch East India Company.

Each country will usually have at least one stock exchange where its leading companies will list their stocks (or shares). Today there are less than 20 stock exchanges with a market capitalization of over $1 trillion. The so-called ‘$1 trillion club’ exchanges account for more than 80% of the global market capitalization.

Stock exchange

Although this financial survey questionnaire is focused on the critical aspects of personal finance, I find the stock exchange topic really interesting. Therefore I have decided to include this small bonus topic on stock exchanges.

Bonus Topic: This list of the top 5 largest stock exchanges is based on the market capitalization data from the World Federation of Exchanges as of November 2018.

The New York Stock Exchange

Founded in 1792 and has been the world’s largest stock exchange since the end of World War I when it overtook the London Stock Exchange. It has a market capitalization of $22.9 trillion and about 2,400 listed companies. According to the 2017 data from Gallup, more than 54% of Americans had invested in stocks listed at the NYSE. The NYSE alone accounts for roughly 40% of the world’s stock market capitalization. Stocks traded here appear in the SP500 and Dow Jones indexes.

The NASDAQ Stock Market

Founded in 1971 in New York City. NASDAQ is considered the Mecca of technology companies because of many of the world’s most significant technology. Companies such as Apple, Microsoft, Facebook, Amazon, Alphabet, Tesla, Cisco, and others have done IPO and have equities listed here. As of November 2018, NASDAQ had a market capitalization of $10.8 trillion, with an average monthly trading volume of $1.26 trillion.

The Hong Kong Stock Exchange

Founded in 1891. It has close to 2,000 listed companies, about half of which are from mainland China. It has a monthly trading volume of $182 billion and a market capitalization of $3.93 trillion. In 2017, the exchange closed its physical trading floor to shift to electronic trading. Some of the biggest companies listed at the Hong Kong Stock Exchange are AIA, Tencent Holdings, PetroChina, China Mobile, and HSBC Holdings.

The Shanghai Stock Exchange

It is the largest stock exchange in China and has a market capitalization of $4.02 trillion. It is a non-profit organization and has more than 1,000 listed companies. Though its origins date back to 1866, it was suspended following the Chinese Revolution in 1949. The Shanghai Exchange, in its modern avatar, was founded in 1990. Stocks listed at the Shanghai Stock Exchange have ‘A’ shares that trade in local currency and ‘B’ shares that are priced in the US dollar for foreign investors.

The Tokyo Stock Exchange

Founded in 1878 and is among the top 10 largest stock exchanges in the world. It has close to 2,300 listed companies with a combined market capitalization of $5.67 trillion. Trading at the Tokyo Stock Exchange was suspended for four years after World War II. It resumed operations in 1949. TSE’s benchmark index is Nikkei 225, which consists of the largest companies, including Toyota, Honda, Suzuki, and Sony.

Question 7 – What is a stock?

The stock of a corporation is all of the shares into which ownership of the corporation is divided. A stock represents fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the stockholder to that fraction of the company’s earnings, proceeds from the liquidation of assets or voting power, often dividing these up in proportion to the amount of money each stockholder has invested.

A public company, or publicly-traded company,  is a company whose ownership is organized via shares of stock.

Financial survey questionnaire - personal finance without fear

Question 8 – Mutual funds

I am sure everyone has heard about mutual funds. Several of us have even invested money in them. Nevertheless, I am sure many of us don’t fully understand what mutual funds are and how they work. That can be seen by this financial survey questionnaire, only 67% of respondents get this question right.

Mutual funds are the most popular and widely used investing tool in the U.S. About 44% of households own a median amount of $100,000 mutual funds. That translates to about 92 million individuals investing in circa 7,500 funds.

A mutual fund pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.

From this brief explanation, it is clear that a mutual fund can bring a tremendous positive impact on your portfolio. By investing in a mutual fund, you can quickly diversify your portfolio and have access to investments that usually are available only for professional investors.

But don’t be fooled by the sales pitch of your bank manager or broker. A mutual fund is as good as the people managing it. Furthermore, there are dozens of different types of funds that might fit better or worse to your current investment portfolio. High maintenance fees and poor portfolio management can easily manage your mutual fund, underperform the market.

ETFs or exchange-traded funds often offer similar or better results than mutual funds. To understand how to select a good ETF and a good mutual fund, read my article on how to choose a mutual fund benchmark index.

When can you withdraw money from a mutual fund?

Liquidity is one of the significant advantages of mutual funds. There here is nothing to prevent you from withdrawing your mutual fund holdings as long as it is an open-ended fund. Both equity funds and debt funds can be technically withdrawn as soon as the fund is available for daily sale and repurchase. 

Should you withdraw the funds in less than 6 months? No. Mutual funds are medium to long term investments. Before buying one, you should have a clear understanding of your goals with the fund, your risk appetite, and the benchmark the fund should follow. As long as these three factors are kept in line, unless you have an emergency and desperately need the money, you should not sell it.

Where can a mutual fund invest in?

The portfolio of the fund will depend on its type, risk appetite, and ultimate goal. Most mutual funds invest in bonds and stocks. Still, they can also invest in all sorts of securities and financial instruments. One of the advantages of mutual funds is to give access and liquidity to asset classes that previously were available only to big investors.

Mutual funds expected returns and paSt performance

Past performance is no guarantee of future performance. The value of the mutual fund company depends on the performance of the securities it decides to buy. So, when you buy a unit or share of a mutual fund, you are purchasing the performance of its portfolio or, more precisely, a part of the portfolio’s value.

Question 9 – Bonds

Bonds are one of the most common investment classes, but still, only 56% answer this question correctly in the financial survey questionnaire. This question has actually one of the highest scores of “do not know” responses, 26%.

Bonds are debt securities. Meaning that when you buy a bond, you are actually lending your money to the issuer of the bond. The bond terms will define how much interest will be paid for the holder of the bond.

Corporate bonds are debt securities issued by a corporation, likewise, govenrment bonds are issued by the government.

Questions 10, 11 and 14 – Risk, volatility, and potential returns over time

Risk, volatility, and potential returns are directly linked. Overall, the higher the risk, the higher the volatility, and the higher the potential gains. If you think about it, it does make sense. If you buy a risky asset, you will see it fluctuating up and down more often than if you buy safer security.

We can say that volatility is directly proportional to the asset risk. As such, to the potential gain, you can expect. Therefore, from the previous question, it’s clear to see that stocks are more volatile than bonds and that savings account is the less volatile of all. Of all the difficult questions in this quiz, this one has shown the highest rate of correct answers, 68%!

Simply put, volatility is the range of price change security experiences over a given time. If the price stays relatively stable, the security has low volatility. Highly volatile security hits new highs and lows quickly move erratically and has rapid increases and dramatic falls.

People tend to experience the pain of loss more acutely than the joy of gain. Therefore a volatile stock that moves up as often as it does down may still seem like an unnecessarily risky proposition. However, what seasoned equities traders know that the average person may not is that market volatility actually provides numerous money-making opportunities for the patient investor. Investing is inherently about risk, but risk works both ways. Each trade carries with it the risk both of failure and of success. Without volatility, there is a lower risk of either.

Over an extended period, the highest return comes typically from stocks, as does the higher share price volatility and risk. This is quite clear if we use the U.S. market as an example. When planning how to invest your money, it is important to understand what is your risk tolerance.

Savings account historical returns

Looking at the 5 years CD (certificate of deposit) rate over the past 10 years, we can see that it fluctuated from 0.8 to 2.2% per year. Shorter-term deposits show an even smaller return.

Bonds historical returns

The 10-year Treasury bond is the benchmark used to decide mortgage rates across the U.S. and is the most liquid and widely traded bond in the world. In the past 10 years, this bond has paid between 1.5% and 4% per year.

Stocks historical returns

Over the past 10 years, the SP500 10 Year Annualized Return rate has given an average return of 6.14%. To see how to increase your stock returns you can read this great article my MoneyByRamey on dividends.

BONUS TIP: You can read more about how to deal with risk when investing in this post of mine: Hope, Predictions and Historical Data: 3 recipes for financial failure

Question 12 – Diversification

Spreading your money over different asset classes, or diversifying your portfolio, is the best way of reducing the risk of losing money. At the same time, as you reduce the risk, you also reduce the chance of high returns. Therefore, diversification is good up to a certain point, and this sweet spot will depend on the investor to investor depending on your risk appetite.

The risk-reward decision around diversification is one of my favorite topics, that’s why I have written an entire post about it. You can read more here: How to take risks when managing your money? 3 lessons I learned to avoid poor money management

Bonus Topic: Learn here 6 proved steps on how to manage money and unlock financial freedom. Start investing in your financial freedom today.


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About the author:

Personal Finance Made Easy

Hi, I am Leblon Blue. Mid-thirties senior manager on a large corporation. Happily married for seven years and waiting for my first kid. I have dedicated my past 15 years to build an engineering background and a stable career. After working in Europe, Scandinavia, and Latina America, I am now based in the Persian Gulf, where I manage the performance of a large corporation that operates in the region.

Find more about Leblon Blue.

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