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economy

A quiz reveals some holes in Americans' financial literacy.

Financial literacy is always important, but in uncertain economic times, it's vital. The financial world is complex and multi-faceted, and there's no exact gauge of what you need to know in order to be considered informed. There are, however, some financial fundamentals that everyone needs to understand on a basic level in order to avoid making catastrophic money decisions and to be able to follow what's happening with the economy on a larger scale.

Unfortunately, many Americans have never taken an economics class and aren't well-versed in things like inflation, investments, interest rates, and other economic realities. To be fair, economics can be confusing even when you try to learn, but without understanding some basic concepts, it can make a huge difference in your financial wellbeing.

financial literacy, money, finances, economics, economyMany Americans need to increase their financial literacy.Photo credit: Canva

The non-profit FINRA Investor Education Foundation surveyed 25,500 adult Americans and asked them to take a seven-question financial knowledge quiz to test their financial literacy. The results were a bit concerning, as only a small fraction of quiz-takers answered all seven questions correctly.

Here are the questions they asked:

1. Suppose you have $100 in a savings account earning 2 percent interest a year. After five years, how much would you have?

More than $102

Exactly $102

Less than $102

Don't Know

2. Imagine that the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, would the money in the account buy more than it does today, exactly the same or less than today?

3. If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?

4.True or false: A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage but the total interest over the life of the loan will be less.

5. True or false: Buying a single company's stock usually provides a safer return than a stock mutual fund.

6. Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn't pay anything off, at this interest rate, how many years would it take for the amount you owe to double?

a) 0 to 2 years

b) 2 to 4 years

c) 5 to 9 years

d) 10 or more years

e) Don't know

financial literacy, math literacy, economics, finances, money managementSome financial literacy is just math literacy—understanding percentages and probabilities. Photo credit: Canva

7. Which of the following indicates the highest probability of getting a particular disease?

a) There is a one-in-twenty chance of getting the disease

b) 2% of the population will get the disease

c) 25 out of every 1,000 people will get the disease

d) Don't know

"Don't know" was an option for each question, and the average correct score across the Americans who took the quiz was 3.3 out of 7. Nationwide, 27% of people who took the quiz got the right answers on at least five of the questions, and only 4% aced all seven questions.

- YouTubewww.youtube.com

Which states fared the best and worst? Here are the 10 top states by percentage of survey respondents that correctly answered five or more of the quiz question:

1. Minnesota (34.78%)

2. Wisconsin (34.46%)

3. District of Columbia (34.41%)

4. Colorado (33.89%)

5. Wyoming (33.85%)

6. Washington (32.54%)

7. Vermont (32.34%)

8. North Dakota (32.00%)

9. Oregon (31.86%)

10 Kansas (31.44%)

And here are the bottom 5 by the same metric:

New Mexico (23.2%)

West Virginia (21.4%)

Alabama (20.2%)

Mississippi (19.2%)

Louisiana (18.1%)

One piece of good news: Americans' understanding of inflation has increased significantly since the last time FINRA did a similar survey in 2021. (Or maybe that's not such good news, as it's likely a better understanding that came from experiencing an inflation crisis, but learning is learning.)

"Overall, the findings show that knowledge of everyday financial concepts remains a challenge for many Americans. The wide disparities in financial knowledge across states demonstrate that more work is required to empower all Americans with the skills and tools to make informed financial decisions and safeguard their investments,” said Gerri Walsh, President of the FINRA Foundation. "The increase in the number of respondents who correctly answered the question about the impact of inflation on savings is an encouraging sign, likely reflecting the impact of lived experience as well as increased focus on the topic. However, continued efforts are needed to ensure all Americans fully understand the effects of economic factors on their personal finances."

Not only does a lack of financial knowledge have the potential to impact people's personal finances, such as getting into credit card debt trouble or choosing unwise investments, but not understanding how things like inflation and the relationship between interest rates and investment markets can lead people to vote for politicians with questionable economic policies. How can you believe a politician will be good for the economy if you don't understand what factors contribute to keeping the economy stable and strong?

You can take the quiz yourself here and see how your knowledge compares.

A UPS driver on a phone call.

Certain professions have an inside look at the economy because they’re on the ground floor and see things change firsthand. For example, the advertising business knows that a recession is coming six months ahead of time, and realtors often get a good idea of how the economy is changing before the shock hits everyone else.

Delivery drivers are another group of people who can get a good idea of how the average person is doing. They have more packages to deliver when the economy is doing well and fewer when things take a turn for the worse. That’s why a TikTok by UPS driver Donate McCauley (@dontaymccauley) has so many views. After delivering Christmas packages, he thinks things are going well for most people at the end of 2024.

“I thought everybody was broke. I thought we were trending towards a recession, and y’all been complaining all year about finances, and y'all say that until Christmas,” the UPS driver said in a video with over 100,000 views.

@dontaymccauley

credit card debt going crazy. #ups #peakseason #Texas #foryoupage

“I see y'all actually do got money. And y'all making us pay, for every house got, like, 3, 4 packages. I'm loaded up,” McCauley continued. “Every day I'm going out with 400 packages on this truck, and y'all killing us, man, give us a break. But I thought you ain't have no money, though?”

Is the U.S. economy good or bad in 2024?

The post received many comments; some said they are having difficulty getting by this year, while others say they are doing pretty well these days. It’s another example of the lukewarm way that people have viewed the U.S. economy since the COVID-19 pandemic subsided.

“Broke as in it costing me a whole helluva lot more to live than it should. I will always have money for Christmas one way or another,” Lisa Marie wrote. “We’re using After Pay. I did LOL,” Juanita added.

“I have been saying this ALL YEAR. Every restaurant, every tourist attraction, special event, and retail store is PACKED most of the time in my small ‘poor’ city,” SteelersGirl wrote. “I said this to my husband a few weeks ago. Everywhere I go, people are buying stuff. Car dealership was packed last week, too. The economy seems ok,” Wiat What wrote.

Another delivery driver chimed in, and she felt the same way as McCauley. “USPS here. I have been saying this for the last year,” ChicagoGirl wrote.



Are Americans spending more during holiday seasons?

The confused delivery driver who says that people are saying one thing but spending in another tracks a pre-election poll. A survey taken in September 2024 found that 62% of respondents said the economy was weak, while 38% said it was strong.

Regardless of how individuals feel about the economy, the numbers don’t lie. 2024 was a strong holiday season for retailers. Visa says that spending is up this holiday season 4.8% over 2023. "This holiday shopping season, we’re seeing increasing consumer confidence as people sought out in-store experiences – and went online – to purchase gifts and celebrate the holidays with friends and family,” Wayne Best, chief economist at Visa, said in a statement. “This spending growth demonstrates the adaptability of both consumers and retailers and the overall strength of the economy.”

This article originally appeared last year.

Education

11 old-timey frugal living habits younger generations need to bring back ASAP

"A penny saved is a penny earned" hits harder in economically uncertain times.

Photo by Jimmy Dean on Unsplash

Learning to cook can save a lot over eating out.

Though people can't seem to agree on what makes the American economy "good" or "bad" (with people's perceptions being heavily influenced by who sits in the White House at any given time), there's no question that economic uncertainty is on many people's minds. Middle-agers who lived through the Great Recession of 2008 and the COVID-19 pandemic of the early 2020s know how fast economic stability can falter, and youngsters have started their adult lives with unaffordable housing and education as well as post-COVID inflation driving up the cost of everyday living.

With a major upheaval of the U.S. government unfolding in early 2025, uncertainty seems to be the theme of the day. When financial instability hits, it's time to take measures to mitigate it however we can, and thankfully, we can learn a thing or two from our elders who lived through the money struggles of two world wars and the Great Depression. Frugality was a way of life for our grandparents and great-grandparents, and though times have changed—a lot—many of those wise ways to save money still stand. And the good news is that many of them are good for the environment and our health as well as our wallet, so

Here are some of the easiest, best frugal living habits we can take from previous generations:

couple cooking togetherCooking can be fun and a money saver. Photo by Jimmy Dean on Unsplash

Cook from scratch

Even with the cost of groceries being higher than they were, it's almost always significantly cheaper to eat at home than it is to eat out. Learning to cook is a useful and enjoyable (for many) hobby that can also save you money, as long as you're not trying to cook something overly fancy. Cooking doesn't have to be complicated, and it's never been easier to find simple recipes. There are even sites that will come up with a menu and recipes for you based on what you already have in your pantry. Stock up on basic ingredients, keep it simple, and find some favorite meals that you can whip up quickly and easily.

Less meat, more beans

Meat is pricey—especially good quality meat—and with animal-borne diseases becoming more of a concern, animal products in general are getting more expensive. Perhaps now would be a good time to transition to more of a plant-based lifestyle, making more use of cheaper protein sources like beans. Canned beans are generally quite affordable, but dried beans are even cheaper if you don't mind taking the time to soak and cook them. If you have an Instant Pot, it's super easy to batch cook dry beans, which you can then store cooked in the freezer for quick reheating.

stainless steel bowls of spicesBulk spices are often a fraction of the price of jarred. Photo by Jason Leung on Unsplash

Buy herbs and spices in bulk

Spices in jars are stupidly expensive sometimes, and you might assume that's just what they cost. But if you've never shopped in the bulk spice section at a store—even at an expensive health food store—you might be surprised by how much cheaper it is. Leafy herbs like oregano, thyme, basil, and sage weigh almost nothing, so even if they cost $20/lb, a jar's worth is often pennies to the dollar cheaper than buying them already packaged. (Just beware heavier spices, as sometimes those can be just as expensive as jarred. Definitely worth comparing, though.)

Borrow and barter

When times are tough, getting by becomes a community effort, but there's no reason we have to wait for an actual economic depression to help one another out or scratch one another's backs. We all have things that sit around not being used much of the time that others might like to borrow, from tools to books. Trading services can be an excellent way to save money in a win-win way.

hands in a gardenGrowing your own food can save a bunch in the long run. Photo by Sandie Clarke on Unsplash

Grow a garden

During the pandemic, many people started growing WWII-style "victory gardens" simply because they could, but gardening can be a great way to save on produce and herbs. If you can start early in the spring and grow from seed, even better. Though learning to keep a garden thriving can be a little trickier than it looks, the savings can be impressive. For instance, one tomato plant can harvest 10 to 20 pounds of tomatoes, so even if you spend $5 on a starter plant, you can save a ton compared to produce section prices at the store. No yard? Gardening in containers works, too.

Clean with vinegar and baking soda

It may seem like a small thing, but lots of small things like cleaning products add up. Buying vinegar in bulk and diluting it 50/50 with water makes a great basic cleaner, and baking soda in bulk can help you scour surfaces as well. Vinegar smell doesn't last long, but you can always add a little essential oil to the mix to add some scent. You might need a stronger disinfectant for certain cleaning jobs, but for a basic cleanser, vinegar gets the job done.

Reuse or reutilize containers

So many foods we buy come in jars or containers, most which get tossed or recycled. Then we go out and buy containers for storing leftovers or other things. Aesthetically, I get it. But practically and financially, reusing or reutilizing containers makes more sense, even if you just use them once or twice and then toss or recycle. Plus, if you reuse jars or containers you're not planning to keep, you can write on them with a Sharpie without feeling like you ruined it.

woman riding white bikeBike more. Photo by Murillo de Paula on Unsplash

Drive less

Americans love to drive and many of us do it far more often than we need to, spending more on gas than necessary. And even though gas prices have come down most places, it still isn't cheap. Combining trips or making a once a week "errand day" can help us cut down on driving. So can carpooling or biking or walking more.

Buy used

Thrift store shopping can save a ton of money, especially if you shop around to various thrift shops to find the ones that actually have good stuff at low prices. Clothes especially can be a much better deal used than new, and no one will ever know the difference. Furniture is also a fraction of the cost used vs. new, and often older furniture is better quality anyway. Check Facebook Marketplace, Craigslist and other online markets for used items before running to the store or buying something new online.

person wearing black and gray jacket in front of bookshelfLibraries usually have a lot more to offer than just books. Photo by matthew Feeney on Unsplash

Utilize your public library

Public libraries are treasure troves of free stuff, and not enough people take full advantage of them. Not only can you get books, but many libraries have huge collections of movies or other entertainment. Some have art collections you can check out, others have tools and household items you can borrow. There are also free book clubs, lectures, classes and other activities that can add to your social calendar without spending anything.

Make do with what you have

This might sound like a no-brainer, but many of us have gotten into the habit of buying whatever we think we need simply because it's convenient. Amazon has created some habitual buying habits that we might want to rethink if we're trying to save money. Do you really need a new jacket or is the one you have still perfectly usable? Is there still some life left in that pair of shoes? Even holding off on buying things for a month or two and making do with what you have can help you save money and see that you don't need as much as you might think.

Lots of small savings can add up, so don't assume that a few cents or a dollar here and there don't matter. Once you get into these habits, you may even find that frugal living to be a preferred way of life, regardless of your financial situation. It certainly can't hurt to try it.

Community

6 states where the minimum wage and cost of living offer the best bang for your buck

The highest state minimum wage in the U.S. is now $16.28 per hour, but some cities are even higher.

State minimum wages range from $7.25/hr to $17.00/hr in 2024.

Public discourse about minimum wage and living wages has been ongoing for years, with people debating whether the government should mandate a minimum hourly pay for workers. President Franklin D. Roosevelt signed the first federal minimum wage law in 1938, setting the lowest wage a worker could be paid at 25 cents per hour. Nearly a century later, the federal minimum wage is $7.25/hr, holding steady since 2009, with people lobbying to raise it to at least $15/hr for over a decade.

However, in addition to federal law, each state has its own laws, a handful of which establish a state minimum wage higher than $15, a handful of which don't have a set minimum wage at all and everything in between. Cost of living has also been a hot topic as inflation has squeezed everyone's wallets and certain cities and states have become utterly unaffordable, especially for people in low-wage jobs or who who are just starting out in their careers. So how do minimum wage and cost of living correlate state-by-state? Are there any sweet spots with a high(er) minimum wage and low(er) cost of living?

While there’s no perfect storm of super low cost of living and super high minimum wage—for instance, Washington, D.C. has the highest state minimum wage at $17/hr, but housing costs 140% more than the national average—there are some states where the ratio is far more favorable than others. According to Insider Monkey, here are the top six states where you can get the most bang for your minimum wage buck.

6. New Mexico

The Land of Enchantment offers a relatively decent living for its $12/hr minimum wage thanks to the state's below average cost of living. According to Rent Cafe, housing in New Mexico is 8% lower than the national average, monthly utilities are 9% lower, food is 4% lower, transportation is 3% lower and healthcare, goods and services are 2% lower.

According to Smart Asset, Albuquerque, New Mexico ranks as No. 10 in U.S. cities where minimum wage goes the furthest.

5. New Jersey

The Garden State's relatively higher-than-average cost of living is counteracted by relatively solid minimum wage of $14.13/hr. Most of the cost of living in New Jersey is wrapped up in housing, which is 30% higher than the national average, according to Rent Cafe, and utilities, which are 12% higher. Goods and services are 5% higher, but healthcare is 2% lower than the national average. Food and transportation are 1% and 2% higher, respectively.

4. Connecticut

With both a cost of living and minimum wage slightly higher than New Jersey, Connecticut rolls in at No. 4 with a $15/hr minimum wage. Where the Constitution State hits hardest is in utilities, which Rent Cafe places at 30% higher than the national average, and housing, which is 24% higher. Healthcare and goods and services are both 9% higher, while transportation and food are just 1% and 2% above average.

3. Missouri

The Show-Me State says, "Show me the money!" with its somewhat respectable $12/hr minimum wage, which goes pretty far with its relatively low cost of living. Housing is the biggest cost benefit Missouri offers at 18% lower than the national average. But utilities, food, healthcare, and goods and services are also all below average, with only transportation landing right at the national average.

Additionally, St. Louis clocked in at No. 5 for a minimum wage real-world value of $13.68 when adjusting for the city's lower-than-average cost of living.

2. Washington

With the highest state minimum wage in the nation (unless you count Washington, D.C.), Washington's $16.48/hr puts it in second place when accounting for cost of living. Make no mistake, Washington isn't cheap overall, with a cost of living 15% higher than the national average. Housing and transportation hit hard at 29% and 27% higher than the national average, respectively. Healthcare is pricey as well at 20% higher than average. Food costs 12% more, but utilities clock in at 7% less than the national average.

Two cities in Washington hit the top 15 for highest real minimum wage value, though, with Seattle at No. 13 and Spokane at No. 2.

map of united states with these states highlighted in green: Washington, New Mexico, Missouri, Illinois, New Jersey and Connecticut

These six states offer the best minimum wage to cost of living ratio.

Created with mapchart.net

1. Illinois

If you want the best bang for your minimum wage buck, head to the Prairie State with its $13/hr minimum wage and 8% lower than average cost of living. Housing in Illinois is 22% lower than average and utilities are 10% lower. The only expense that comes in higher than average for Illinois is transportation at 3% above average, which isn't enough to keep it out of the top spot.

However, there are some minimum wage sweet spots in certain U.S. cities that aren't reflected in these state rankings. According to Smart Asset, Denver, CO, is the city where minimum wage goes the farthest in the nation. Colorado comes in at a respectable 7th place in state minimum-wage-to-cost-of-living ratio, but Denver has its own mandatory minimum wage of $18.29/hr.

A citywide minimum wage is part of what puts Seattle at the No. 13 spot on that same list. Seattle is one of the most expensive cities in the U.S., but its $19.97 minimum wage for most workers changes the ratio in its favor.

Other cities in the top 10 include Buffalo, NY; Minneapolis, MN; Tucson, AZ; St. Paul, MN; Phoenix, AZ and Stockton, CA.

The minimum wage conversation may vary widely across the U.S., with different costs of living and different state laws on the books. But if you're looking to move someplace where your wage will go the furthest, these six states will likely be your best bet to check out first.


This article originally appeared last year.