April is Financial Literacy month in the United States. Since we Bermuda residents (at least, some of us) love to mimic our US neighbours in so many trends: styles, investments, entertainment, why not adopt the Financial Literacy Month Initiative here, too, unofficially, of course?

Almost everything in our daily lives is tied to finance. Yet, according to the FINRA US surveys: over 40 per cent of US families have no budget and spend all their income; 56 per cent do not have a rainy-day savings account; more than a third of Americans only pay the minimum credit card balance. In a five-question basic financial literacy test taken by more than 25,000 individuals, the national average was 2.8 out of five correct answers.

Hmm. I wonder if we Bermuda residents are smarter financially?

What better way to see if you, dear reader, meet the basic financial literacy standard. Yes, it is that time again — to challenge, annoy, or encourage individuals to improve their knowledge of all things financial in Bermuda — with a test.

I haven’t given a Financial Literacy Quiz Challenge in a number of years. The last one garnered some serious comments: “You must be kidding, the last thing I want to do on the weekend is take a test- and get a king-size headache!” But a few brave souls did step up to the challenge.

I’ve used examples from other tests (FINRA Foundation*) and real-life situations that are applicable to Bermuda financial life. Note that some questions have more than one right answer.

If you’d like to send me your answers, confidentially of course, please do so. The results will be published next month.

1. The Bermuda dollar is worth more than the US dollar.

a. True, it is worth more.

b. False, it is worth less.

c. Nonsense, the Bermuda dollar is worth the same as the US dollar

d. The Bermuda dollar buys more groceries than the US dollar.

2. Which is the best food-worthy purchase choice for an individual’s daily protein need?

a. A giant bunch of kale sautéed with seasoned tofu.

b. A great big bag of salty, vinegary potato chips.

c. A container of low-fat cottage cheese.

d. None of the above, thank you very much, I’ll make my own food purchase decisions with my money. Besides, I personally hate duty foods like kale and cottage cheese.

3. Your credit card company charges 18 per cent, compounded annually. Your balance is $5,000 after buying that designer bag. You are stressed and can only pay $100 per month for the next few years. You vow never to charge another thing!

a. You can pay off the balance in two years.

b. You will pay off the balance in five years.

c. You will never pay off the remaining balance.

d. You will pay for your handbag twice: once for actual cost, the second in credit card interest.

4. Which one of these drinks/popcorn has the most expensive empty calories per dollar cost?

a. 16 ounces of Coke

b. Four cups of buttered and caramelised popcorn (the average movie size)

c. A litre bottle of wine

d. 16-ounce bottle of Guinness stout

5. Your mortgage is amortised. This means that:

a. You pay the same cash amount each month;

b. Your interest amount is the same each month;

c. Your principal payment is the same each month;

d. Each month the amount of your principal payment goes up and the amount of interest goes down.

6. Your cash in an account in a Bermuda bank is:

a. Guaranteed by the bank to give it back to you.

b. Guaranteed by the Bermuda Government to give it back to you.

c. Guaranteed by your wealthy mother-in-law.

d. None of the above.

7. Your life insurance statement says you have a cash value because:

a. It is a term policy.

b. It is a variable annuity policy.

c. It is a universal life policy.

d. It is a whole of life policy.

8. You need to convert 10 Bermuda dollars into British pounds? Today the pound is at 1.47. What will you get in pounds?

a. £6.80.

b. £10.47.

c. You ask the bank teller to give you the most pounds you can get.

d. Less than £6.80.

9. You used to have a high-interest rate money market fund.

a. The interest rate was guaranteed.

b. The interest rate was calculated the same as a fixed term deposit.

c. The market value was fixed at one dollar.

d. The fund is made up of short-term debt.

9. It is almost time for you to collect your Old Age Contributory Pension from the Bermuda Government. You are not sure you can get a pension, because:

a. You are over 65 and have no intention of retiring.

b. Your employer deducted your pension from your wages, but never paid into the pension pot.

c. Your statement says you did not contribute the specified number of payments.

d. You are living outside Bermuda.

10. You have already passed to glory, now your relatives learn you did not make a will. Of course, you don’t care because you are not here.

a. The Bermuda Government will decide who gets your Bermuda assets.

b. Your ex-husband will inherit your Bermuda National Pension as he is listed as the beneficiary.

c. Your current spouse thinks he should inherit all your assets as your next-of-kin.

d. Your minor children will get your life insurance policies and your house. Why?

Have fun — it is only money and a bunch of numbers. Answers and commentary in one month’s time.

Sources: * FINRA Investor Education Foundation National Financial Capability Survey.

http://www.usfinancialcapability.org/quiz.php

Martha Harris Myron CPA PFS CFP JSM, Masters of Law: International Tax and Financial Services. Appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. The Pondstraddler* Life™ Consultancy provides cross border financial planning for internationally mobile individuals and their businesses residing, working, crossing borders, and straddling ponds in the North Atlantic Quadrangle. Specific focus on residents of Bermuda, the premier international finance centre.

Contact: martha@pondstraddler.com