The Wealth Knowledge Test: 12 Questions Every Investor Should Be Able to Answer

Financial literacy isn't about knowing exotic products — it's about being able to answer a dozen plain questions about your own money. Take this test honestly. No grades, no judgment; every “no” is simply your next assignment.

The test

1. What is your net worth — roughly, within 10%?
2. What is your savings rate — the share of income you keep each month?
3.  How many months of expenses could you cover if income stopped tomorrow?
4.  What interest rate are you paying on each of your debts?
5. Can you explain compounding — and why starting early matters more than saving more?
6. What's the difference between a stock and a bond?
7. What is an index fund, and why do costs matter so much over decades?
8. What total fees are you paying on your investments — funds plus advice?
9. Why does time in the market beat trying to timethe market?
10. What does diversification actually protect youfrom — and what doesn't it?
11. Which tax-advantaged accounts are you eligiblefor, and are you using them?
12.  If something happened to you tomorrow, do you have a will and current beneficiaries on every account?

What good answers look like

Questions 1–4 are about awareness. Strong answers are specific numbers, not feelings.If you can't produce them, start with a one-page balance sheet and three monthsof expense tracking — those two exercises answer all four.

Questions 5–10 are about principles. The honest one-line answers: compounding is growth earning growth, which is why an early start beats a bigger, later one. A stock is ownership; a bond is a loan. An index fund owns the whole market at minimal cost — and cost is one of the few things you fully control. Time in the market wins because the best days cluster unpredictably, usually near the worst ones. Diversification protects you from any single holding sinking you — it does not prevent temporary declines, which are the price of admission.

Questions11–12 are about structure. Tax-advantaged accounts (workplace retirement plans, IRAs, education accounts) are the highest-certainty “return” most people ever get — confirm current limits and eligibility. And beneficiary designations override your will, so an outdated form can undo an entire estate plan.

Scoring yourself

10–12 confident answers: you have the foundation — your work is optimization and discipline. 6–9: solid instincts with real gaps; the awareness questions usually come first. Under 6: you're exactly who this resource library was built for — start with the budgeting and Investing 101 pages and retake the test in three months.

The goal isn't a perfect score. It's knowing which question to work on next.

Want to close the gaps? IPM Advisory can walk through the twelve questions with you and turn every “no” into a checklist item with a deadline.

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