Money quiz: Are you smarter than half of Australians?

An embarrassingly high number of Aussies can't pass this money quiz. Photo / 123RF

A basic test designed to gauge our understanding of finance is proving too hard for most Australians — and experts say their ignorance on the subject is reaching "dangerous" levels.

Embarrassingly, more than 50 per cent of Australians couldn't answer the simple set of five questions laid out by researchers as part of the latest Household, Income and Labour Dynamics in Australia (HILDA).

Best-selling author of Unf*ck Your Finances and CEO of The Money Barre, Melissa Browne said the results are not surprising because the vital subject has been neglected in Australia for decades — and it is leaving us at risk.

"I'm not surprised we didn't do well because financial understanding isn't something we prioritise in Australia," she told news.com.au. "It isn't taught at school or universities so we sort of piece it together ourselves later in life.

"I think it's concerning that we're abdicating our responsibility to learn about finances. It's a really dangerous option, because there's ever-increasing change in the world of finance and, if we don't even have a basic level of financial literacy, it could leave us all at risk."

During interviews with hundreds of everyday Aussies as part of the HILDA report, researchers at the University of Melbourne asked five questions to measure their understanding of financial numeracy, inflation, money and risk return.

The simple questions asked Aussies how much interest they would get on $100 in one year on a no-fee savings account with a guaranteed interest rate of two per cent per year.

Researchers then went on to ask what the effect of inflation might have on those savings, before asking participants whether buying shares in a single company usually provides a safer return than buying shares in a number of different companies.

Finally, they then asked participants whether an investment with a high return is likely to be high risk and how an increase on our earnings tallies with the prices of the things we buy.

Do you have what it takes?

Australia's embarrassing results

The results showed men had better financial knowledge than women — with 49.9 per cent of men and just 35.4 per cent of women answered all questions correctly.

"There is a clear gender divide in financial literacy," the report's authors concluded.

Breaking down the results by age and sex, the report's authors say financial literacy is lowest among young Aussies. Only 24 per cent of people aged 15 to 24 answered all five questions correctly.

This increased to 38.3 per cent for those aged 25-34, rising to 38.2 per cent for this aged 35-44 and again to 49.2 per cent for this aged 45-54.

Aussies aged 55-64 are the most financially savvy, with almost 55 per cent of participants in the HILDA study answering all five questions correctly. After we've blown out the candles for our 65th birthday however, it seems this knowledge seems to stagnate as only 39.6 of us answered all the questions correctly after we've hit the big 65.

Ms Browne told news.com.au Aussie or "Western" culture might play a role in our attitudes towards financial knowledge — adding we often find it uncomfortable to talk about money in public and many of us find it boring.

"It needs to be taught in school and university, but it's something also something we all have to have more interest in," she said. "It might not be something we get excited by, but we need a basic understanding of money if we want to retire and live well."

She said the key to remedying this dire situation is self-education and planning ahead for future events — especially when it comes to our superannuation and retirement.

Research has shown a widespread lack of financial knowledge leads us to make bad life choices and, if so many of us are making bad decisions, it could have disastrous consequences for out economy as a whole.

"Despite rising levels of income and wealth in the Australian community, the issue of financial literacy remains highly relevant, with many policymakers in the wake of the 2008 Global Financial Crisis bemoaning the widespread lack of financial knowledge," researchers Annamaria Lusardi and Olivia Mitchell wrote in a report for the National Bureau of Economic Research in 2014.

"US research, for example, has consistently shown that levels of basic financial skills are very poor among sizeable fractions of the population, and that this has ramifications for a wide range of economic decisions."

HILDA researchers looked at how financial literacy differs by region in Australia. However, they said there is "little evidence" to suggest there are big differences between our understanding based on where we live.

They discovered, however, that your job status often makes a difference.

"Financial literacy is highest for the full-time employed and lowest for the unemployed," they concluded in the report. "Indeed, even controlling for income, wealth and income support receipt, financial literacy is considerably lower among the unemployed."

They also measured how differing different economic and family circumstances and education played a role in our ability to understand basic finance.

"Partnered people have higher measured financial literacy, while children aged 15 and over living with their parents have relatively low financial literacy," the report reads.

"Single parents also have low financial literacy, although once economic outcomes are controlled for, they do not differ significantly from single people."

"University education is strongly associated with financial literacy, while those who have not completed high school have the lowest levels of financial literacy. People with non-university post-school qualifications have similar levels of financial literacy to those who have completed high school."