Think you know investing? Most Australians are failing the basics

Australians have always been obsessed with property – and many Aussies are sitting pretty on housing market gains – but skyrocketing prices are leaving younger generations locked out. This highlights how crucial it is to master building wealth through other asset classes. But here’s the kicker – our investment know-how might be lacking.

The majority (74 per cent) of people who have taken a new 15-question investing knowledge quiz developed by wealth platform InvestSMART, where I’m chief content officer, failed it.

The investment know-how of Australians might be lacking.Credit: Illustration: Michael Mucci

Should we be worried about the results of this quiz? The simple answer is yes. Financial literacy is the bedrock of financial success, so knowledge can help lead to smarter decisions.

More than 1000 people have already taken the financial literacy quiz, Test Your Invest Smarts, which features questions such as: could you identify a scam text message? Do you know what qualifies as a concessional super contribution? Or how about what the S&P/ASX 200 Index tracks?

While 63 per cent correctly identified a scam message, just 3 per cent got the concessional contributions question right and just 20 per cent answered the S&P/ASX 200 Index question accurately.

Only 26 per cent of Australians managed to get a pass mark of eight out of 15 – the average score was six. Not a single person aced every question.

The gender gap was stark. Men outperformed women, with 35 per cent of males passing versus 18 per cent of females. Men were also more than twice as likely as women to score 10 or higher on the test (19 per cent to 7 per cent).

If you’re curious about how the generation battle went, Baby Boomers were top-ranked with a pass rate of 30 per cent, ahead of Millennials (29 per cent), Gen Z (24 per cent) and Gen X (22 per cent).

Income levels also appear to be a factor in how people performed on the quiz. Households with an annual income of $150,000 or more were more likely to have passed (48 per cent) compared with those from lower-income households. But understanding investing concepts shouldn’t be the sole domain of the well-paid.

The cost of living crisis has forced most Australians to focus on day-to-day expenses rather than building wealth. Credit: Louie Douvis

I get why the results were less than stellar. It’s been a tough few years and the cost of living crisis has forced most Australians to focus on day-to-day expenses rather than building wealth. But the fact is, it’s more important than ever to understand the basics of investing because it is one of the few accessible paths to building wealth.

With the great Aussie dream of homeownership increasingly unattainable, it might be time to embrace a new Aussie dream – one that doesn’t require a picket fence. To do that, it’s essential to get a grasp on investing. And remember that saving little and saving often is one of the most effective wealth-creation strategies.

So, how invest-smart do you think you are? Take the Test Your Invest Smarts quiz to see where you sit. When you’ve identified your strengths and weaknesses, you can create an action plan to improve your knowledge. It’s a good idea to set a small achievable goal to get you started.

Effie Zahos is chief content officer and Money Commentator at InvestSMART. She is the author of The Great $20 Adventure, A Real Girl’s Guide to Money and Ditch the Debt and Get Rich. Effie sits on the board of directors for Ecstra, a not-for-profit organisation committed to building the financial capability of all Australians.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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