Most adults still fail the financial literacy test

April is, of course, crunch time for taxes, and while your personal numbers are fresh in mind, the financial services industry highlights a host of events and reminders about financial literacy and retirement planning.

So, do you feel smarter about money yet?

Releasing its annual index measuring financial literacy recently, researchers at the TIAA Institute said 52 percent of U.S. adults could not answer more than half of its financial literacy questions correctly.

Among respondents 45 and older, just 21 percent answered more than three-quarters of the questions correctly. And just 10 percent of adults under 45 answered more than 75 percent of the questions correctly.

Interestingly, both older and younger people scored highest on questions about debt, and lowest on questions about understanding risk. And across all categories, participants 45 and older scored higher than their younger counterparts.

“Individuals are exposed to debt from a relatively early point in their working lives, via credit cards, students loans and buying a first car,” said Paul Yakoboski, senior economist at TIAA Institute. “They’ve gained knowledge from practical experience, and even if they didn’t make the best decisions, the exposure serves as a learning experience.”

With fewer Americans owning stocks and other investments, conversely, it makes sense they would have less of a grasp on the fundamentals of risk, Yakoboski said.

Survey participants overall answered just 39 percent of the risk-related questions correctly, and they responded “Do not know” to 28 percent of them.

Respondents 45 and older correctly answered 67 percent of the questions about borrowing, while younger ones answered 53 percent correctly.

On savings-related questions, the older group answered 60 percent correctly, while the younger group answered 44 percent accurately.

The older age group scored higher in every category, including earnings, spending, investing, ensuring understanding various informational resources geared to financial literacy.

“It’s not just the concept of investment risk, but uncertainty overall,” Yakoboski said, referring to job stability and other types of uncertainty over the course of a life.

Of all the elementary concepts of risk, one of the most important is the sense of understanding the need for emergency savings, said Billy Hensley, education director for the National Endowment for Financial Education.

“It’s not just about knowing you need a set dollar amount,” he said. “It’s having a plan in place to respond when the inevitable hiccups occur –– you lose your job, there’s a health crisis, a major repair or a family member who needs help.”

To develop your understanding of risk even further, Yakoboski said, think about the relative probability of certain disasters happening. While you need to think about mitigating all kinds of risk, for example, consider prioritizing risks according to the likelihood they might occur, he said. Given all kinds of uncertain financial outcomes, it’s important to form expectations based on concrete data.

That might make someone realize the importance of disability insurance, for example, overloading up on an overfunded life insurance policy.

“Literacy matters,” Yakoboski said. “Individuals with higher levels of financial literacy do experience better outcomes.”

Janet Kidd Stewart writes The Journey for Tribune Content Agency. Share your journey to or through retirement or pose a question at journey@janetkiddstewart.com.