What’s your financial IQ?
Imagine you're on a TV quiz show. The host turns to you and offers a list of topics, one of which is Your Personal Finances. Based on your knowledge, is this a category you would choose.
If you answered no, you're not alone. Seventy-three percent of Denverites failed a basic financial IQ quiz, according to this year's "Financial Matters" study, sponsored by Northwestern Mutual to help gauge the American public's overall financial knowledge and understanding of insurance products.
But the results aren't all bad - the good news is that three of four Denver residents want to know as much as they can about their financial situations. Taking responsibility for personal finances is the first step to securing financial futures.
Breaking Down the Results
So, what did the results tell us on a local level?
• Thirty-one percent of residents of the Mile High City reported feeling like they are in a worse financial situation than other people their age.
• When rating their own acumen, people from Denver were less likely to identify critical features of financial products like flexibility or growth as important to them.
• Denver residents were less likely to identify all goals put forth in the survey as "very important," including supporting elderly family members, having long-term care insurance, or saving for a house.
As for where consumers find information and whom they trust, when asked to rate the reliability of several sources of financial information, they rated financial advisors as the most reliable source.
Increase Your Knowledge
Many consumers have trouble understanding financial products. For example, the study found that permanent life insurance is among one of the most misunderstood financial products. Only 25 percent of Americans realize that permanent life insurance can pay dividends annually, and nearly half believe, incorrectly, that term life insurance is more likely to have cash value.
In fact, permanent life insurance delivers a stable, flexible financial asset. The guaranteed accessibility to the cash value of the permanent life insurance product - for such things as retirement income, purchasing a home or even paying for children's education - makes it one of the most valuable assets people can own.
Take Northwestern Mutual's online quiz at www.financialmattersquiz.com to honestly assess your financial knowledge.
Several other tools exist that can help you take a closer look at your own finances. Many insurance providers, like Northwestern Mutual, offer calculators to plan for everything from saving for retirement, investing for college, to starting a business, or becoming a millionaire. Visit the Northwestern Mutual Learning Center to see and use calculators to plan for those goals and more.
Finally, consider talking to a qualified financial professional, who can provide guidance, answer questions and, most importantly, understand your long-term financial goals. These goals prove critical to a sound financial future, including income protection and ensuring enough money will be saved for a comfortable retirement.
This article was prepared by Northwestern Mutual with the cooperation of Scott Theodore, CLU, ChFC, CFP®. Theodore is the managing partner of Northwestern Mutual - Denver, a network office of The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) Northwestern Mutual Financial Network is the marketing name for the sales and distribution arm of (NM). Northwestern Long Term Care Insurance Company, Milwaukee, WI, is a subsidiary of NM.