Financial Literacy: How Knowledgeable is Your Association?
Tuesday, April 24th, 2012
A recent study of nonprofit financial managers shows that while 83% of those surveyed considered themselves to be at least knowledgeable about finances, only a third correctly answered three basic financial literacy questions. How does your organization stack up?
Over 500 nonprofit professionals who are most responsible for their organization’s overall financial management were surveyed by the Center on Philanthropy at Indiana University. The respondents were queried about their level of financial training and their self-evaluation of their own expertise.
They were also tested with the following three true or false statements:
- “If interest rates rise, bond prices will rise.”
- “When an investor spreads money between 20 stocks, rather than 2, the risk of losing a lot of money increases.”
- “Buying a single company’s stock usually provides a safer return than a stock mutual fund.”
The correct answers are available in our discussion forum.
Over 80% of respondents gave the correct answer for the investment risk and diversification questions. However, only 48% of respondents understand the connection between interest rates and bond prices. That’s a better than a national sample reported by the 2008 Health and Retirement Survey, but worrisome in a business environment where effective financial management may be critical to an organization’s survival.
How financially literate is your association?