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The most financially fragile Americans during COVID-19 have difficulty answering these 15 money questions — can you?

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The more someone understood about interest rates, inflation, risk diversification and other financial concepts, the less likely they show signs of financial “fragility” at a time of serious money pressures for many people across the country, a new study concludes.

There is a link between financial literacy and financial resilience, according to Olivia Mitchell of University of Pennsylvania’s Wharton School, Annamaria Lusardi of George Washington University’s School of Business, and Robert Clark of North Carolina State University’s Poole College of Management.

Their survey, published Monday, polled 3,000 people, ages 45 to 75, between April and May.

At the beginning of the first coronavirus surge in March, 40% of households making under $40,000 per year lost the jobs they had one month earlier. In April, the jobless rate soared to 14.7% and $1,200 direct checks and supplemental $600 federal-unemployment benefits from the $2.2 trillion started rolling out.

Against this backdrop, the researchers asked who could come up with $2,000 for an unexpected emergency within the next month. Overall, 18.9% said they certainly couldn’t, or probably couldn’t do that, which the researchers said made them “financially fragile.”

“In other words, even with the promise of substantial government payments, about 1 in 5 older respondents reported they could not handle a mid-sized unexpected expense,” the researchers said, noting that women, Black and Hispanic participants were all more likely to be in this group.

(This outsized economic effect has been show in various places.)

Here’s where they noticed the literacy link: The so-called “fragile” survey participants correctly answered about half of the three questions about how interest rates are calculated, inflation and risk. People in better money condition answered almost all three (2.5 on average) correctly.

“Big 3” financial literacy questions created by Annamaria Lusardi and Professor Olivia Mitchell:

1. Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

A. More than $102

B. Exactly $102

C. Less than $102

D. Do not know

E. Refuse to answer

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?

A. More than today

B. Exactly the same

C. Less than today

D. Do not know

E. Refuse to answer

3. Please tell me whether this statement is true or false. “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”

A. True

B. False

C. Do not know

D. Refuse to answer

(Answers at the end of article.)

Additional 12 questions formulated in the latest study by Annamaria Lusardi, Olivia S. Mitchell and Robert Clark:

1.Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow?

A. More than $102

B. Exactly $102

C. Less than $102

D. Don’t know

2. Imagine that the interest rate on your savings account was 1% per year and inflation was 2% per year. After 1 year, how much would you be able to buy with the money in this account?

A. More than today

B. Exactly the same

C. Less than today

D. Don’t know

3.Please tell me whether this statement is true or false. “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”

A. True

B. False

C. Don’t know

4.Suppose you owe $1,000 on a loan and the interest rate you are charged is 20% per year compounded annually. If you didn’t pay anything off, at this interest rate, how many years would it take for the amount you owe to double?

A. Less than 2 years

B. At least 2 years but less than 5 years

C. At least 5 years but less than 10 years

D. At least 10 years

E. Don’t know

5.Suppose you had $100 in a checking account that pays no interest. If you withdrew 5% of what was left in the account each year, how much do you think you would have left in the account at the end of 2 years?

A. More than $90

B. Exactly $90

C. Less than $90

D. Don’t know

6.There’s a 50/50 chance that Jay’s old car will need repair in the next year, which will cost him $800. Also, in the next year, there is a 10% chance that Jay will need to replace the carpeting in his home and basement which will cost him $3,000. Which poses the greater expected cost to Jay?

A. The car repair

B. The carpeting replacement

C. There is no way to tell in advance

D. Don’t know

7.Which statement is true? Alex has a low credit score. This means that:

A. He has a history of late payments and carrying balances on his credit cards

B. He can get a low interest rate on loans and credit cards

C. He can get a low premium on car and homeowner’s insurances

D. Don’t know

8.Susan worries about living a long life and running out of money. How could she manage that possibility?

A. There is nothing she can do about this

B. Buy life insurance

C. Buy an annuity

D. Don’t know

9.Jesse is a retired worker. Which statement is correct about Jesse’s Social Security?

A. Jesse’s monthly Social Security benefits will be the same no matter how old he was when he started to receive them

B. Social Security will pay Jesse a benefit sufficient to maintain his pre-retirement living standard

C. Social Security will pay a benefit to Jesse until he dies

D. Don’t know

10.Chuck plays the lottery, spending $50 per month on tickets. Which statement is correct?

A. This is a good strategy to accumulate wealth

B. To accumulate wealth, Chuck should save the money each month rather than buy lottery tickets

C. It is a good strategy if Chuck has a good system to pick numbers

D. Don’t know

11.Bill and Mary own a house which they would like to sell to move to a smaller place. Which statement about selling the house is correct?

A. Bill and Mary must pay off their existing mortgage before they can put their old house on the market.

B. Bill and Mary cannot get a new mortgage unless they get back their purchase price.

C. When Bill and Mary sell their house, they will receive the price they sell their house for, minus their outstanding mortgage and other expenses associated with selling the house.

D. Don’t know

12.Suppose Andy purchases an appliance that retails for $1,000 with equal monthly payments of $100 per month for 12 months. The total payments Andy made by the year’s end total $1,200. What is the interest rate that Andy paid for this purchase?

A. More than 10% but less than 20%

B. More than 20%

C. Not enough information to calculate the interest rate on his purchase

(Answers at the end of article.)

“A person with three correct answers is 6.3 percentage points less likely to report being unable to cover a $2,000 unexpected expense compared to a person who answered none of the three questions correctly,” the researchers wrote. In the 12-question index, every right answer reduced the chance of financial fragility by one percentage point, they said.

The same trend played out when researchers asked extra questions about annuities, compound interest, credit scores and other money matters. The more financially prepared correctly answered on average 8.5 of the 12 question, versus 6.3 for the financially fragile.

People with a better understanding of money were already making better spending and saving decisions ahead of the pandemic, when many household budgets were put to the test, “and this still holds true after controlling on socio-demographic characteristics, including education and income,” the authors said.

Less than half of Americas’s 50 states require a personal-finance course. As of this year, 21 states require high-school students to take a personal-finance course, up from 17 in 2018, according to the Council for Economic Education, an organization focused on K-12 financial education. Half of U.S. states mandate a high-school economics course, up from 22 in 2018.

Despite the increase in mandated financial education, other studies ahead of the pandemic have suggested that Americans’ grasp on financial literacy is slipping.

Compared to 2009, more people across various age groups couldn’t correctly answer basic questions on topics like mortgage rates, financial risk, and inflation, according to the FINRA Investor Education Foundation, the educational arm of the nonprofit organization regulating the brokerage industry.

Of course, financial savvy can’t solidify someone’s finances if they face dim job prospects during a global pandemic. There are many people who are just trying to stay in financial “survival mode” right now which could affect they handle money matters now. Some financial literacy proponents note the limits on financial instruction.

Monday’s study noted that drawback too, but emphasized the value in financial education in the broader school system. “Of course, financial education cannot erase deep socioeconomic inequalities overnight,” they wrote, “but it can equip people with the knowledge to better deal with economic shocks, and plan for the future.”

(Answers from “Big 3” questions are 1. A., 2. C., 3. B.)

(Answers from additional 12 are: 1. A, 2. C, 3. B, 4. B, 5. A, 6. A, 7. A, 8. C, 9. C, 10. B, 11. C, 12.B)



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My ex-wife passed away. I’m the beneficiary on her life insurance. Her family wants me to pay her funeral expenses and won’t leave me alone

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I am 32, and just a month ago I found out that my ex-wife, whom I haven’t spoken to since we divorced, passed away tragically in a moped accident. My ex-wife had life insurance through her job. My ex-mother-in-law informed my father that my ex-wife had kept me as her beneficiary on her life-insurance policy, and her family wants the money for funeral costs, bills, etc.

Not only did my ex-wife have me on her policy as the primary (and only) beneficiary, she updated my home address on the policy after we divorced. Also, I found out through the insurance company that my ex-wife had two term life-insurance policies, one for me and one for my ex-sister-in-law.

I blocked my ex-in-laws, and now I received a threatening voicemail from a blocked number, so I’ve taken it upon myself to notify the authorities. I live in New York, I am remarried, and my divorce was very simple and easy. We left the marriage with what we came into it with. The life-insurance company approved the check in my name, and is sending it to my home.

Am I legally in the clear? I have not spoken to or bothered these people once since we divorced five years ago. I just want to be left alone and move on with my life.

Thank you very much in advance.

Best regards,

Fed-Up Ex-Husband

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

Dear Fed Up,

First, I’ll deal with your life insurance concerns, and then the subject of your ex-wife’s funeral expenses.

The life-insurance policy was between your ex-wife and her insurer. It’s possible to overturn a life-insurance policy if it explicitly goes against the terms of a divorce decree, as happened in this case, but that too was a complicated lawsuit. Some states do have statutes that can revoke such beneficiary arrangements.

In “Kaye Melin and Metropolitan Life Insurance,” the children of the deceased were awarded the proceeds from the life-insurance policy, not the ex-wife who was named as beneficiary on the agreement. In that case, the law presumed that what her ex-husband wanted after their divorce was incorrect.

The ruling stated: “Thus, if a person designates a spouse as a life insurance beneficiary and later gets divorced, Minnesota law provides that the beneficiary designation is automatically revoked. At least twenty-eight other states have enacted similar revocation-upon-divorce statutes.”


‘I’m reluctant to say that you are ‘in the clear,’ given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce.’

I’m reluctant to say that you are “in the clear,” given previous court rulings, and statutes in some states on the revocation of named beneficiaries post-divorce. In your case, it seems clearer that your ex-wife wanted you to be the beneficiary. She did, as you say, update your address. It would be hard to see a more explicit sign of her intentions than that.

“Unless the policyholder of the life-insurance plan changes the beneficiary designation officially, the people originally named will remain the beneficiaries through the life of the policy,” according to Heban, Murphree and Lewandowski, a law firm in Toledo, Ohio. “Even if the policyholder was not on speaking terms with the individual upon his or her death, that beneficiary would still receive the income.”

“In the case of someone who divorced and remarried, the policy may name the first spouse as beneficiary. If the policyholder never changed the policy to reflect the divorce and remarriage, the ex-spouse could end up with the benefit. This can cause the current spouse and any children from the second marriage to dispute the beneficiary designation on the policy,” it adds.

But much, I suspect, would depend on what state you live in, and the specifics of your case.

On a separate issue, it’s difficult to glean from your letter whether your in-laws had little funds to pay for the funeral expenses, or were mad as hell that you were listed as beneficiary and felt you should contribute, or both. On the one hand, it seems like they are not in a state of mind to be reasonable and, chances are, if you did engage it would lead to further demands and acrimony.

Perhaps you could talk to your ex-wife’s lawyer and see if there is enough money to cover the costs of her funeral and, if not, you could make a contribution. But given the alleged harassing phone calls, their anger and grief, and their antipathy toward you, you would need to have all correspondence go through the attorney and refrain from any direct communication.

There is no excuse for their taking their grief out on you. Still, spare a thought for her family. If you are fed up, imagine how they feel.

The Moneyist: My boyfriend talked me into depositing my paychecks into his bank account, and paying for a car in his name. What can I do?

Hello there, MarketWatchers. Check out the Moneyist private Facebook
FB,
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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.





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These money and investing tips can help you when inflation is burning a hole in your wallet

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, focus on helping you make sense of the recent spike in U.S. inflation. Understand how rising prices can affect your investment portfolio, and taking appropriate steps now to respond, can prevent unpleasant surprises later.



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No, you’re not crazy. Yes, CDC mask guidelines are confusing — should you stop wearing a mask in public or not?

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Wear a mask. Don’t wear a mask. Make one. Buy one. Wear it outdoors. Wear it indoors.

Confused? You’re not alone.

So what’s the deal with the CDC’s new guidance? “Anyone who is fully vaccinated can participate in indoor and outdoor activities, large or small, without wearing a mask or physical distancing,” Dr. Rochelle Walensky, the director of the U.S. Centers for Disease Control and Prevention, said on Thursday. “If you are fully vaccinated, you can start doing the things that you had stopped doing because of the pandemic.”

Vaccines have helped to slow the spread of the coronavirus, and this appears to be a natural next step for Americans tired of masking up. “We have all longed for this moment when we can get back to some sense of normalcy,” Walensky said.

We are still far, far away from normal. You can take off your mask “except where required by federal, state, local, tribal, or territorial laws, rules and regulations, including local business and workplace guidance,” the CDC says. You still need a mask on buses and trains, in museums and most stores, possibly at your place of work, but not inside restaurants, except when you’re going to the rest room.

How do you know a maskless person is vaccinated? It’s an honors system. The CDC guidance gives less reason for people to abide by that old American Express slogan: “Don’t leave home without it.” People are leaving home without their masks, even in states that still require everyone — vaccinated or not — to wear them in outdoor public spaces, including on the streets of New York.

Many people are fed up, it seems. Little wonder: The CDC’s announcement took many health professionals by surprise: According to a New York Times survey, 29% of epidemiologists surveyed thought people would be wearing masks in public spaces for at least aanother year, while 26% said they believed people would do so for another year, and 26% said they thought mask wearing would continue in some form from now on.


‘You still need a mask on buses and trains, in museums and most stores, possibly at your place of work, but not inside restaurants, except when you’re going to the rest room.’

The change in CDC mask guidelines comes just over a year since the CDC said everyone should wear masks. In April 2020, the Trump administration and the CDC reversed their policies on face masks, and said all Americans should wear cloth face coverings and not — as officials previously said — just medical workers. Trump cited “recent studies,” while the CDC cited “new evidence.”

Fast-forward to Thursday. “I think it’s a great milestone, a great day. It’s been made possible by the extraordinary success we’ve had in vaccinating so many Americans so quickly,” a maskless President Joe Biden declared in the White House Rose Garden declared, citing the vaccines from Johnson & Johnson
JNJ,
+0.15%

Pfizer-BioNTech
PFE,
-0.20%

and Moderna
MRNA,
+7.68%
.

“It’s going to take a little more time for everyone who wants to get vaccinated to get their shots. So all of us, let’s be patient with one another,” the president said.

Forgive the public for having mask rules fatigue. We’ve been on quite a journey. Studies earlier in the pandemic suggested that adopting the practice of mask wearing, one that was already accepted in many Asian cultures, would have saved tens of thousands of lives. Many Americans were understandably frustrated, but also eager to do anything they could to stop the virus.

‘So what’s the deal with the CDC’s new guidance?’


MarketWatch illustration

Flashback: Dr. Nancy Messonnier, director of the Center for the National Center for Immunization and Respiratory Diseases, said in a briefing on Jan. 30 last year, “The virus is not spreading in the general community. We don’t routinely recommend the use of face masks by the public to prevent respiratory illness. And we certainly are not recommending that at this time for this new virus.”

Three months later, New York Gov. Andrew Cuomo, a Democrat, ordered all New Yorkers to cover their faces in public when they can’t maintain a proper social distance. “You’re walking down the street alone? Great! You’re now at an intersection and there are people at the intersection, and you’re going to be in proximity to other people? Put the mask on.”


‘These are just guidelines from the CDC. It’s up to the states to decide what to do next. New Jersey and New York still maintain their mask guidelines in public spaces.’

The CDC’s latest mask announcement are just guidelines. It’s up to the states to decide what to do next. And that’s a whole other story. New Jersey and New York still maintain their mask guidelines when in public spaces. Gov. Phil Murphy, a Democrat, is examining the guidelines, a spokeswoman for his office said in a statement. Murphy, like many governors, wears a mask in his Twitter profile. Perhaps that tells us all we need to know.

Roughly half of U.S. states have some mask mandate. Alabama, Louisiana, South Carolina, Florida, Mississippi, Nebraska, and Texas, among others, had already removed their statewide mask mandates in public spaces and/or had not instituted one. Florida Gov. Ron DeSantis, a Republican, said Thursday he would grant clemency to gym owners who broke the mask mandate.

Texas Gov. Greg Abbott, a Republican, officially ended his state’s face-mask mandate in March, and allowed businesses to reopen, despite opposition from rival lawmakers and health professionals at the time. Gilberto Hinojosa, chairman of the Texas Democratic Party, described the move as “extraordinarily dangerous” and said it “will kill Texans.”

Cuomo, meanwhile, perhaps still reeling from this time last year when New York was the epicenter of the pandemic in the U.S., was definitive in maintaining current policy. Keep your masks on. “In New York, we have always relied on the facts and the science to guide us throughout the worst of this pandemic and in our successful reopening,” he said in a statement.


‘People take off their masks to make phone calls on the street in states where there is a mandate to wear them in public places, and they take them off while they are sitting outdoors eating.’

Vermont Gov. Phil Scott, a Republican, said his state will follow the CDC guidelines. “Later today, we’ll be updating Vermont’s mask mandate following the CDC’s updated guidance, announced yesterday,” he tweeted Friday. “This will mean those who are fully vaccinated no longer need to wear masks — indoors or outdoors — nor do they need to be concerned with physical distancing.”

In Nevada, Gov. Steve Sisolak, a Democrat, said the state updated its own policies on mask wearing to follow the CDC’s guidelines with immediate effect. Nevada Health Response added: “COVID-19 is still very much a threat in our State and many Nevadans may choose to continue using masks based on their and their families’ personal health concerns. Others should respect this choice.”

That statement, perhaps more than any other, illustrates the tension, fear and frustration not only with state laws and changing guidance, but with each other. People take off their masks to make phone calls on the street in states where there is a mandate to wear them in public places, and they take them off while they are sitting outdoors eating. Most people are doing the best they can.

In California, Gov. Gavin Newsom, a Democrat, said people should still wear masks in public spaces for now, but likely not after June 15 when the state fully reopens. “Only in those massively large settings where people around the world, not just around the country, are convening and where people are mixing in real dense spaces,” Newsom told KTTV.

“Otherwise we’ll make guidance, recommendations, but no mandates and no restrictions in businesses large and small.” Is that all crystal clear? I’ll leave that for you to decide.





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