Do you need to be more financially literate?

26 Feb 2009
UQ Business School experts Dr Darren Lee and Dr Karen Alpert have developed a short quiz to test the financial literacy of UQ staff and students. The super-quick quiz includes very simple questions about what happens to your bond investments when the Reserve Bank lowers interest rates, how much income tax you generally pay if your income falls within the 30% marginal tax rate, and how much you have to pay if your credit card is stolen by someone who then goes on a spending spree. Dr Lee said anyone scoring lower than eight out of 12 on the test should seriously consider ways to improve their financial literacy. "In this economic environment you really have to understand what is happening to your money and if you're not managing it yourself you need to know if others are doing so in your best interests," he said. Dr Lee said the questions that caught most people out were the ones about relative interest rates and the time value of money. "A good example of making a financially illiterate choice occurs when some people choose to put aside their savings for a holiday whilst only paying the minimum balance outstanding on their credit card - not realising that, in this situation, paying off the credit card first and then using it to pay for the holiday is a far more efficient use of their money." "You have to understand your own financial situation and get a grip on the fundamental principles - there has never been a worse time to rely on the maxims our parents' generation passed on." "Many of them simply don't apply in our far more complex financial world." "You can take the test online." Dr Lee has been teaching at UQ Business School since 2005. He began his career in industry working in the areas of treasury, financial planning, and funds management. Dr Karen Alpert has been teaching at UQ Business School since 2001. She worked as a tax accountant prior to earning her PhD in finance.