Money Matters
4:24 am
Tue January 18, 2011

Three questions that can determine your wealth

If you and your spouse can correctly answer three simple math questions, a recent study suggests you'll have plenty of money in retirement. Financial commentator Greg Heberlein gave the quiz to KPLU's Dave Meyer, and you can take it, too. Patricia Sabatini of the Pittsburgh Post Gazette obtained the questions from the RAND Corporation.  They are:

1. If the chance of getting a disease is 10%, how many people out of 1,000 would be expected to get the disease?

2. If five people all have winning numbers in the lottery, and the prize is $2 million, how much will each of them get?

3. Let's say you have $200 in a savings account. The account earns 10% interest per year. How much would you have in the account at the end of two years?

You'll find the answers at the end of this post.

The study was conducted by researchers at the RAND Corporation, the University of Southern California and the University of Michigan.

It found when couples over the age of 50 were able to correctly answer the three questions, their household wealth averaged $1.7 million.  If neither spouse correctly answered any of the questions, their total wealth averaged $200,000. The more questions answered correctly, the greater their household wealth.

RAND's James P. Smith says:

"We examined several cognitive skills and found that a simple test that checks a person's numeracy skills was a good predictor of who would be a better family financial decision maker."

The findings are published in the November edition of The Economic Journal.

Warning:  Researchers did not study the effectiveness of the quiz in settling disputes over household finances. Use at your own risk!




Quiz answers:

1. 100

2. $400,000

3. $242