Financial Knowledge Centre

Financial wellbeing: Financial literacy quiz

Written and accurate as at: May 20, 2021 Current Stats & Facts

When it comes to achieving financial wellbeing, financial literacy plays a fundamental ongoing role.

Financial literacy* has been defined as ’a combination of awareness, knowledge, skill, attitude and behaviours necessary to make sound financial decisions and ultimately achieve individual financial wellbeing’.

Further to this, financial wellbeing^ has been defined as ‘when a person is able to meet expenses and has some money left over, is in control of their finances and feels financially secure, now and in the future’.

With the above in mind, below is a short quiz to test your knowledge across the various personal finance areas—cash flow, debt, investments, superannuation, insurances, taxation, estate planning, and aged care.

You can find the answers to the questions located at the bottom of this article.

Financial literacy questions

Question 1 (Cashflow)

When forecasting future cash flow needs, it’s important to consider:

Taxes.
Fees.
Changes to your personal situation.
Inflation.
All of the above.

Question 2 (Cashflow)

If your lifestyle costs are currently $45,000 per annum, assuming an inflation rate of 3% per annum, what would a similar lifestyle cost in 5 years?

$47,450.
$52,167.
$50,647.
$231,750.

Question 3 (Debt)

If you borrowed $80,000 to invest in a diversified investment portfolio and the total valuation of the investment portfolio is $130,000, what’s the loan to valuation ratio of the investment portfolio?

61.5%.
38%.
162.5%.
1.6 times.

Question 4 (Debt)

If you borrow to purchase an investment property for $300,000 and it’s leased for $200 per week (market rates). Is the interest on the loan deductible for tax purposes?

Depends on the interest rate of the loan.
No.
Depends on whether it’s residential or commercial.
Yes.

Question 5 (Investments)

What is diversification?

Where you spread your portfolio over a number of asset classes (and their sub-asset classes).
Where you have a share portfolio consisting of investments in a broad range of sectors, industries and geographical regions.
Where you have a number of managed funds that you invest into.
All of the above.

Question 6 (Investments)

If you invested $100,000 into shares returning 12%, $100,000 into cash returning 5%, $100,000 into fixed interest returning 6% and $100,000 into property returning 9%, what’s your total portfolio % return?

8%.
12%.
7.5%.
9%.

Question 7 (Superannuation)

A concessional contribution generally refers to a contribution that can be claimed as a tax deduction by the contributor. The annual concessional contributions cap for the current 2020-21 financial year is set at:

$300,000.
$100,000.
$35,000.
$25,000.

Question 8 (Superannuation)

The tax rate on earnings (income and capital gains) from assets supporting a retirement phase superannuation income stream (eg an account-based pension) is:

15%.
10%.
32%.
0%.

Question 9 (Insurances)

Trauma insurance is used to provide protection for?

Loss of income whilst you are sick.
An event such as a heart attack.
If you were to die.
If your business partner dies.

Question 10 (Insurances)

A waiting period for income protection insurance refers to:

The time it takes for the claim to get accepted by the insurance company.
The length of time that the insured benefit will be paid to you.
The time you have to wait after a claim event occurs before you start receiving your insured benefit.
The time spent waiting for a specialist doctor.

Question 11 (Taxation)

Your employer is making concessional contributions to your superannuation fund. They are paying 9.5% of your income under the Superannuation Guarantee Levy. You earn $100,000 per annum. What is the tax rate applied in your superannuation fund on these concessional contributions?

30%.
15%.
10%.
0%.

Question 12 (Taxation)

Which of the following situations would not involve any assessable income being brought to account for taxation purposes for a taxpayer who works as an electrician?

Selling their fridge and surfboard.
Selling their fridge and earning bank interest.
Earning bank interest and selling their surfboard.
Receiving a wage and selling their surfboard.

Question 13 (Estate planning)

If you pass away without a will (or with an invalid will), how will the distribution of your estate assets be determined:

Your eligible relatives can decide how to distribute.
By the rules of your superannuation fund.
It will always be paid to your children.
It’s paid to your eligible relatives in a set order that varies for each state/territory in Australia, then the State (Crown).

Question 14 (Estate planning)

Which power of attorney continues to operate if you are in a coma?

Enduring power of attorney.
General power of attorney.

Question 15 (Aged care)

What are two of the main types of Government-subsidised aged care services offered while you reside at home?

Commonwealth Home Support Programme and Home Care Package.
Age Pension and Home Care Package.
Commonwealth Home Support Programme and assistance from family.
Residential Care Programme and My Aged Care Support Package.

Question 16 (Aged care)

When thinking about an aged care service, it’s important to consider the following:

The type of service and eligibility, how to organise the services and the cost to you.
Personal preferences, namely, to receive assistance whilst residing at home or within a residential aged care facility.
Seek professional advice from your financial adviser.
All of the above.

Financial literacy answers

Question 1 (Cashflow)

The correct answer is E. All of the above influence future cash flow needs. For example: taxes and fees reduce the return on investment and the income you receive; changes to your personal situation may lead to reduced or increased cash flow needs; and, inflation increases the cost of living.