Are you as money smart as you think?

You might want to rethink who balances the books in your house after this quiz. Source: Supplied

MOST people think they're pretty savvy when it comes to scoping a deal or managing their money.

Not so, according to a recently published report, which reveals with just three simple questions that most people aren't nearly as smart as they think,

Annamaria Lusardi and Olivia S. Mitchell's study The Economic Importance of Financial Literacy: Theory and Evidence sought to find out exactly how financially literate people are.

To measure it, they asked three simple questions:

1. Suppose you had $100 in a savings account and the interest rate was 2 per cent a year. After 5 years, how much do you think you would have in the account if you left the money to grow:

A) More than $102

B) Exactly $102

C) Less than $102

D) Do not know, refuse to answer.

2. Imagine that the interest rate on your savings account was 1 per cent a year and inflation was 2 per cent a year. After a year, would you be able to buy:

A) More than,

B) Exactly the same as,

C) Less than today with the money in this account?

D) Do not know, refuse to answer.

3. Do you think that the following statement is true or false? 'Buying a single company stock usually provides a safer return than a stock mutual fund.'

A) True

B) False

C) Do not know, refuse to answer.

Scroll down for the answers

If inflation is higher than your interest rate on savings, do you have more money to shop or less? Source: News Limited

The questions are designed to expose people's understanding of the fundamental concepts of financial literacy including interest rates, inflation and risk diversification.

The authors found they generated surprising results with very few people displaying a strong understanding of the concepts.

Germany had the best results, with 57 per cent of people answering all the questions correctly followed by the Netherlands with 46 per cent and United States with 35 per cent.

Italy was next with 28 per cent of people answering all three correctly, followed by Japan, Sweden and New Zealand who all registered 27 per cent of people getting all three correct.

The lowest level of financial literacy was found in Russia where just three per cent of people got all of the answers right. Unfortunately there were no Australian results but take the test above and see how you fare.

For more on the report, click here.

The answers:

1 - A

2 - C

3 - B

How do you rate your financial literacy? Continue the conversation on Twitter @newscomauHQ| @Victoria_Craw