Money stress? Check your financial literacy.

Money stress? Check your financial literacy.

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Few topics are as stressful as money, and there’s nothing like tax season to amplify financial anxiety.

The problem with money stress is that it creates a negative cycle. Research suggests that people who are anxious about money are less likely to plan for retirement, which in turn can increase anxiety about their financial future.

About 41 percent of U.S. adults reported feeling both anxiety and stress when thinking about or discussing their personal finances, according to data from the 2018 Finra National Financial Capability Study. The good news is that improving your financial literacy can help you face your money problems, cut down debt and approach the future with less anxiety.

Three questions have become a benchmark for measuring financial literacy. They don’t require complex calculations but will help you gauge your understanding of compound interest, inflation and risk diversification. Here are the questions.

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

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

3. True or false. Buying a single company’s stock usually provides a safer return than a stock mutual fund.

Researchers found that those who could correctly answer these three questions were significantly less likely to feel financially anxious or stressed. (The correct answers are: a, c and false.)

If you found the questions simple and you still have money stress, it’s never too late to keep building your financial literacy. I’ve compiled a list of stories from our popular personal-finance writer Michelle Singletary, whose work can guide you through filing taxes before the April 18 deadline, help you assess your financial health and start making plans to get on a better financial path.

Five last-minute tax tips before the April 18 deadline

10 things to know before filing taxes in 2023

And now that you’ve got your taxes under control, here’s more great advice from Michelle. I highly recommend her “money milestones” for every age — you’ll want to get the whole family involved!

Where do you stand financially? Get a score on this quiz — and our advice.

Michelle Singletary’s money milestones for every age.

You can sign up for Michelle’s newsletter Personal Finance here,

Please let us know how we are doing. Email me at [email protected].