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Are Cuffelinks readers smarter than average?

It's a worry when a simple survey of financial literacy shows half of men and nearly two-thirds of women cannot answer correctly five simple questions. It's even worse when 13.4% are wrong on the majority of the questions, especially when we expect people to understand credit cards, buying a house and even the most complicated financial subject of all, superannuation.

Surely, Cuffelinks readers will nail these questions. The survey below will take only a minute or so to complete.

The Household, Income and Labour Dynamics in Australia (HILDA) Survey is a nationally representative longitudinal study of Australian households. Now in its 13th year, it collects information annually, from the same pool of people, on a wide range of aspects of life in Australia, including household and family relationships, child care, employment, education, income, expenditure, health and wellbeing, attitudes and values on a variety of subjects, and various life events and experiences.

Of particular interest to us here at Cuffelinks were the findings on financial literacy.

In his opening remarks for the section on Financial literacy and attitudes to finances, Roger Wilkins, Deputy Director (Research) of the HILDA Survey, says:

"Despite rising levels of income and wealth in the Australian community, the issue of financial literacy remains highly relevant, with many policy-makers in the wake of the 2008 Global Financial Crisis bemoaning the widespread lack of financial knowledge."


"Financial literacy is defined by the OECD International Network on Financial Education (2011) as: 'A combination of awareness, knowledge, skill, attitude and behaviour necessary to make sound financial decisions and ultimately achieve financial wellbeing.'

"In Wave 16, the HILDA Survey included measures of basic financial literacy using an approach pioneered by Lusardi and Mitchell (2014). Five questions, respectively covering numeracy, inflation, portfolio diversification, risk versus return, and money illusion, were administered in the interview component."

Respondents were classified into three levels of financial literacy: low (two or fewer correct answers); medium (three or four correct answers); and high (all five questions answered correctly). As the table shows, 13.4% of people are in the bottom category, 44% are in the middle category and 42.5% are in the top category. There was also a significant gender divide, with men collectively scoring 4.1 out of 5 and women scoring 3.7.

We are interested in how Cuffelinks readers compare with this survey, so we have replicated the five questions in a quick quiz, linked below. We'll come back with the results next week.

Create your own user feedback survey


Graham Hand
August 13, 2018

Thanks for the great participation in the survey, over 2,000 responses. Update in Thursday's edition.

David Williams
August 13, 2018

These exchanges illustrate the problems that reasonably financially literate people have with financial conversations - even starting with very simple questions. This underscores the vital role of trusted and competent planners in guiding people towards mutually agreed decisions.

Planners also need better common ground to build relationships with their clients. A simple dialogue based on time (a key variable which we all understand) is likely to be much more effective than one which is initially financially based.

Marshall Kimber
August 12, 2018

Based upon the majority of feedback alone, I would suggest the cuffelink readers are smarter, in seeing beyond the simplicity of the questions, but too smart to realise that the question were not designed for their genius, but to seek to ascertain the general level of basic financial literacy, which quite sadly is at a low level.

Graham Hand
August 12, 2018

Thanks, Peter, but we did not design the survey. We simply reproduced the official Government (HILDA) survey to see how our responses would vary, and we needed to have the exact questions for a comparison.

August 12, 2018

Your question number 5 was asked poorly
All income is either gross or net
Gross income is before tax
Net income is after tax
Which income were you referring to??

Geoff W
August 12, 2018

Agree with John
Always taught to save a little from each pay packet. Maybe even make some investments for the future.
With double income, even allowing for taxation implications, I would expect my disposable income would be greater than expenses at double the original cost.

Micky J
August 12, 2018

II formed the opinion that the questions were basic maths nothing more nothing less

August 12, 2018

I consider myself not all that sharp, but I scored 100%, I just answered the question. I have a mate who I would consider far more financially literate than me and he scored not so well. Simply because he wanted to interpret the questions via an incredibly complex set of variable parameters.

I see a similar trend with many comments, makes one wonder.

As far as I can see things, the keep it simple approach has worked for me, diversify, manage cash and one retires early with sufficient funds to have a good life.

John Mc
August 12, 2018

I refer to your questionaire which I responded to achieving 4/5 failing on question 5.My answer was MORE the reason being “ most peoples expenditure would not be the total of their income thus having some in reserve but then again how much if any is saved”.I am just being pedantic and thought the question may have had a sting in the tail.Out smarted myself.Thank you for testing my brain.

August 09, 2018

hi graham

am becoming more of a fan of your newsletter. latest edition looks very interesting and would like to try out my clients on the questionnaire

didn’t know you wrote the cannibals books, that looks great and am very impressed.

August 09, 2018

Could not agree more. I thought it was a joke at first almost looking for the trick in the questions

Kevin Thomas
August 09, 2018

Hahahahahahahahahha. Got all 5 right. I knew studying investing and economics was good for something!!!

George Hamor
August 13, 2018

I don't think the question asked "always"...

August 09, 2018

I disagree agree with the answer to Q4 - higher returns does not always create higher risk. The higher returns works the opposite way = more assets over time

Some people need to learn from Peter Thornhill

John Bannister
August 09, 2018

The designated answer to 5 is wrong. Assuming that your income in greater than your expenditure, there is an increase in the unexpended income.
Like all good surveys with ambiguous questions that produce meaningless results.
How do we compare with the rest?

Graham Hand
August 09, 2018

Hi John, we'll report the full results next week, but the response has been excellent.

August 09, 2018

These questions are so basic as to be laughable. The results say a lot about the apathetic state of affairs with approaching retirees in the importance of self-educating themselves about their retirement planning. No wonder unscrupulous financial advisers see this market segment as an easy target!

August 09, 2018

I got all five right and would consider myself as highly financially literate. Just read and answered the questions on their merit. My engineering background I expect. No second guessing.

August 09, 2018

It is great to see so many Cuffelinks members forming an opinion.
What is better is people involved in testing their financial literature skills.
Keep the surveys coming !

August 09, 2018

I had to laugh on reading the comments.

It seems many Cuffelinks readers are just too smart for their own good (and perhaps that of their clients).

Lesson 1: KISS!

Graham Hand
August 09, 2018

Hi Lloyd, thanks for the feedback, but to be clear, while thousands of financial advisers receive Cuffelinks, the majority of our readers are 'clients', or individuals learning about investing. We try not to be a publication aimed at the industry, as plenty of other publications do that. Cheers, G

Simon Russell
August 09, 2018

This isn't a direct comparison with the original HILDA survey I took a week or two back. I got question 1 wrong on the original survey because I forgot to include a '$' sign in my answer (unlike this version, it allowed for free-form text). I agree with previous comments that the HILDA survey has holes all over the place. Connecting financial literacy (however measured) to actual behaviour is then even more problematic.

Robert Goodwin
August 09, 2018

That would be a NO based on feedback so far? No being "Are Cuffelink readers smarter than average" haha

August 09, 2018

For all we know Q5 was deliberately included to gauge understanding of our tax system, which would have been a great idea !

Inserting a phrase "not including tax implications" or similar, would be a simple thing to do and actually separate those of us with true financial literacy versus those who don't. Wasn't that its actual purpose ? (maybe not)

Suspecting the authors knew exactly what they were doing by creating a trap to further enhance poor results by ensuring even smart people couldn't get 100% and make the survey results seem more "astounding".

Science is undermined a little more every time someone engages in such crap just to skew their results.

Robert Goodwin
August 09, 2018

I cant believe some of the commentary? I agree completely with Thurston. Some people need a hobby? Ouch indeed.

Thurston Howell 4th
August 09, 2018

If you come out swinging because you got a simple financial literacy test wrong, it might say more about you than it does about the test. Ouch!

September 06, 2018

Maybe it's the test that is wrong, not the person taking it ? Ever thought of that ?

All those kids in school who were told they were disruptive, stupid etc., most of them went on to challenge the status quo and form companies that shook the world up. You need those people.

That's why the school system, which relies on this kind of testing, is all wrong. If you don't fit the mould, they discount you as "being wrong".

When there was the recent school test in China about 'how old is the Captain of this boat on which there are pigs, goats and sheep', the answers that came back were VERY smart. Most people wouldn't critically analyse it in that way and instead, think 'the test is right' - obviously, it was written by the teachers, who can do no wrong...

August 09, 2018

I answered question 5 based on the rate of tax being higher for the doubled income, and subsequently was marked incorrect. The question would probably be better written to specify that tax percentage stays the same, otherwise the answer is wrong as it doesn't apply to all situations in the basic form and the answer will be subjective to the real life experience of the respondent.

Otherwise it is troublesome that a majority of people aren't able to answer these questions correctly

Leisa Bell
August 09, 2018

Yes, it's best to view these questions as testing basic understanding of financial concepts. Don't overthink it.

August 09, 2018

Dont overthink it people. It's a survey for financial morons.

August 08, 2018

Personally I found each of the 5 questions open to interpretation. Eg.

o Q1) depends on the frequency of interest rests – is it paid monthly, quarterly, semi-annually or annually?

o Q2) my answer is ‘More’ but they want you to say “less”. (the reason for ‘more’ is that they are talking about your spending money – spend it now or save it for a year at 1%. The problem is that if I have put my spending money in a 1 year TD, I cannot spend it now because its locked in the TD (duhh!). I can only spend it at the end when the TD matures- so I can buy more in a year than now (even though the interest rate is lower than the inflation rate) Ha! got ya!

o Q3) buying shares in 1 company (eg CBA) is certainly safer than spreading it around (diversifying) into stocks like Babcock & Brown, ABC Learning, Allco, etc, etc. This is a real issue because novices always chase the hot stocks and hot funds in every boom. Or I could have really diversified and put money into farming (Great Southern), real estate (MFS, Westpoint, etc ,etc), or infrastructure (BrisConnnections)

o Etc, etc

o So I reckon it’s the policy makers who are financially illiterate!

August 13, 2018

Wow - i think we've uncovered that comprehension is also a weakness

Q1 - "guaranteed interest rate of 2% per year" year and annum has a different meaning?

Q2 - this is exactly why you got the answer wrong

Q3 - hindsight is a great thing. I guess you've never got anything wrong before

September 06, 2018

Technically, Ashley is right. It is those people who, because they cannot understand how someone else sees something to be different, automatically discount their perspective as nonsense because it either doesn't agree with their own or the popular opinion.

The irony is, it is these people who are the renegades, the ones who challenge the status quo and see things differently, are the ones who create things and ensure that we have progression as a human race. Everything is created twice, once in the mind, and once in reality.

It is this questioning of facts, and not taking things at face value that is the strength, not a weakness, but I guess it's easier to criticise and scorn with trite comments like "I guess you've never got anything wrong" and idiotic hashtags, rather than add value constructively.

Still, those of us who think like this will continue quietly getting on with things, while the rest just walk around like sheep.

Dian Clayton
August 07, 2018

That some many people can’t get these basic questions right is appalling! This goes back to poor schooling which does not create a feeling or need to life-learn as we age.

August 07, 2018

#5 is a ridiculous question, really. There seems to be an inherent assumption that right now you spend every cent you earn on "buying things" and that there's no such thing as tax, or progressive tax brackets - if your income doubles then your disposable income, which you "buy things" with certainly doesn't - but I doubt you're expected to think of that. Also the scenario of the price of "everything you buy" and your income both doubling in three years is completely unrealistic.

As far as I'm concerned, I gave the "right" answer, taking into account the various variables, but I was wrong. It's way too complex a question for a simple survey, and "it depends upon the assumptions" is the "correct" answer.

Now that I've seen the type of questions HILDA asks, I think even less of it as a measure than I did before.

Cue the responses from the welfare lobby using a percentage of median income as an absolute measure of poverty and wondering why it doesn't change much.

(Also - what does Cuffelinks have against robots? They're the way of the future... :) )

Leisa Bell
August 07, 2018

Ah-ha! Perhaps Cuffelinks readers are too financially literate? ;-)

Gee Ess
August 08, 2018

I scored 100% because unlike David I only considered the calculations required to answer the questions, in contrast, David wants the question to match the answer his very clever mind has provided in advance and as far as he is concerned the survey is wrong. There's a lesson there.

August 07, 2018

I suspect you will find that the majority of respondents from cufflinks will only score 80% on the quiz as we would all assume that in a progressive taxation system, double income does not equate to double disposable income.

August 06, 2018

5 is a tricky one - do we consider bracket creep?

Graham Hand
August 06, 2018

Hi Brett, ha!, good question. Like most simple questions, there's a more complicated underlying issue, but I think you can assume 'all other things being equal' and keep it as simple and basic as possible. G

August 12, 2018

Tend to agree. If everything doubles, then the amount you save doubles (even if it is only a very small proportion of the total) and hence you will be able to buy more in 2010.

August 13, 2018

I scored 100% because as the saying goes “keep it simple stupid” they are simple questions no need to come up with a complicated thesis for the answer


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