William Watson: Think you’re financially literate? Take these Bank of Canada quizzes to find out

The Bank of Canada has just published a staff discussion paper, “2018 Bitcoin Omnibus Survey: Awareness and Usage” — who knew you could use Bitcoin to take the bus? — that among other things tries to assess survey respondents’ financial literacy, both in general and about Bitcoin. It asks three questions about each. See how you do.

Here are the three questions the Bank’s researchers asked about Bitcoin:

Please indicate whether the following statements about Bitcoin are true or false. If you are unsure, please select “Don’t know.”

A. The total supply of Bitcoin is fixed.

B. Bitcoin is backed by a government.

C. All Bitcoin transactions are recorded on a distributed ledger that is publicly accessible.

The answers are provided below. How do you rate? Right answers count 1, Don’t Know’s 0, and wrong answers -1. If you scored 3, your Bitcoin literacy is “high.” 1 or 2 and it’s “medium.” Zero or below: “low.”

The results? Sixty-one per cent of survey respondents scored “low,” 33 per cent “medium” and just six per cent “high.” Not surprisingly, people who actually own Bitcoin did better: 19, 52 and 29 per cent respectively, for low, medium and high. Fifty-two per cent for “high” rather than 52 for “medium” would be better but at least “low” is low (relatively) at 19 per cent.

And here are the three questions about finance in general:

A. Suppose you had $100 in a savings account and the interest rate was 2.0 per cent per year. After five years, how much do you think you would have left in the account if you left the money to grow?

i. More than $102

ii. Exactly the same

iii. Less than $102

iv. Don’t know

B. Imagine the interest rate on your savings account was 1.0 per cent per year and inflation was 2.0 per cent per year. After one year, how much would you be able to buy with this money in this account?

i. More than today

ii. Exactly the same

iii. Less than today

iv. Don’t know

C. True or false: “Buying a single company’s stock usually provides a safer return than a mutual fund of stocks.”

i. True

ii. False

iii. Don’t know

How do you rate? Same scoring system: Right 1, Don’t know 0, Wrong -1. Add them up and, again, if you got 3 your financial literacy is “high,” 1 or 2 it’s “medium” and 0 or less, “low.”

How did Canadians do? By this simple test, 27 per cent had “low” financial literacy, 36 per cent “medium” and 37 per cent — but only 37 per cent — “high.” It’s nice that “high” gets a plurality. But just a plurality. It seems our financial literacy is as bad as our historical literacy.

The survey is mainly designed to find out about Canadians’ use of Bitcoin. So the results are also broken out by whether respondents themselves own Bitcoin. About five per cent of the overall sample do. As noted above, owners’ knowledge about Bitcoin is greater than in the overall sample, which is both reassuring and not surprising. But their general financial literacy is lower. In the overall sample, 27 per cent of respondents scored “low.” Among Bitcoin owners 38 per cent did.

The discussion paper does not report how many Canadians were familiar with the phrase “caveat emptor.”

Answers:

Bitcoin: A. True B. False C. True

General: A. More than $102 B. Less than today C. True

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