The millionaire quiz

How much do you know about millionaires?

Kris recently had dinner with her friend Linda, who is a high school social studies teacher. As they ate, Linda bemoaned the lack of personal finance and economics education in the United States. She mentioned that every year she gives her economics students a short “Millionaire Quiz” to see just how much they know about wealth and where it comes from. They do poorly at it, which surprises them. Linda says they always pay attention to the follow-up discussion.

I've reproduced the 15-question True or False “millionaire quiz” below. If you've read Get Rich Slowly long enough, or have read The Millionaire Next Door, the answers to these questions should be easy. (Hover over each question to reveal the answer as a “tooltip”.)

    1. Most millionaires are college graduates.
    2. Most millionaires work fewer than 40 hours a week.
    3. More than half of all millionaires never received money from a trust fund or estate.
    4. More millionaires have American Express Gold Cards than Sears cards.
    5. More millionaires drive Fords than Cadillacs.
    6. Most millionaires work in glamorous jobs, such as sports, entertainment, or high tech.
    7. Most millionaires work for big Fortune 500 companies.
    8. Many poor people become millionaires by winning the lottery.
    9. College graduates earn about 65 percent more than high school graduates earn.
    10. If an average 18-year-old high school graduate spends as much as an average high school dropout until both are 67 years old, but the high school graduate invests the difference in his or her earnings at 8 percent annual interest, the high school graduate would have $5,500,000.
    11. Day traders usually beat the stock market and many of them become millionaires.
    12. If you want to be a millionaire, avoid the risky stock market.
    13. At age 18, you decide not to smoke and save $1.50 a day. You invest this $1.50 a day at 8 percent annual interest until you are 67. At age 67, your savings from not smoking are almost $300,000.
    14. If you save $2,000 a year from age 22 to age 65 at 8 percent annual interest, your savings will be over $700,000 at age 65.
    15. Single people are more often millionaires than married people.

How'd you do? I got a perfect score, but that's only because I've been immersed in this stuff for the past four years. Most of this is burned on my brain.

For more information about the answers to this quiz, as well as a brief discussion of the problem of financial education in America, check out “Improving Economic and Financial Education: A Program for Urban Schools”, which was originally published in the May/June 2002 issue of Social Education.

Update: If you can't read the “tooltips”, you can find the answers here. Here's a good past discussion of compound interest. Finally, I've blocked the obnoxious ad, but it'll take a couple hours for Google to process the request.

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Neil Kelty
Neil Kelty
11 years ago

I’d change number 11 by removing the word “risky” – ‘Risky’ stock market to me is penny stocks, etc, but now that I’ve taken the quiz it sounds like its supposed to mean “Avoid the stock market because it is risky.” The “risky” in the answer leads questions – that’s bad statistics.

Rzrshrp
Rzrshrp
11 years ago

Heh, I got 14/15. I can’t understand why ANYONE would want a store credit card outside of that signup discount that they like to give.

Paul Williams
Paul Williams
11 years ago

JD, I couldn’t read the entirety of the tooltips. It cuts off your sentences after a bit. I’m not sure if you can fix that or not. I could still see the True/False answers though, and I found the rest of the answer in the website.

Thanks!

EscapeVelocity
EscapeVelocity
11 years ago

Where are you going to get 8% annual interest, and what about inflation?

sai
sai
11 years ago

JD..I’m from India and am excited to manage a perfect score( although #4 was a guesstimate)!Looks like the time spent in learning about personal finance and regularly reading this blog for the past couple of years is finally paying off. Also that the basics are the same whereever in the world we are.
Just wish I had really digested this knowledge when I was back in high school.

david
david
11 years ago

@Paul Williams:

Are you using Firefox 2? I know it will shorten the alt text on images. If so, try upgrading to Firefox 3.

Beth
Beth
11 years ago

I have Firefox 3 and can’t see any of the answers.

Sarah
Sarah
11 years ago

This highlights our personal responsibility to teach these things to our children! My husband and I often say that if we had only known then what we know now……….Imagine how much easier things would have gone had our parents had even thought to mention personal finance. If I can just pound in one little message to save my daughter the dispare of heavy “bad debt” I will feel accomplished.

Alan Cordle
Alan Cordle
11 years ago

Tooltips are working for me in FF 3.0.2. I love that method so much more than printed upside down answers!

JerichoHill
JerichoHill
11 years ago

Between Erica’s Guest Post and this post, this is exactly the service I see this blog and fellow members of MBN and LR accomplishing.

But we have to get *out there* into the schools, the book clubs, the churchs, civic groups.

J.D.
J.D.
11 years ago

Haha. Okay. Now I see the ad. Blocked. Will take a few hours for Google to process it, though.

Christine
Christine
11 years ago

I got most of these answers correct, less the compound interest ones. Is there a place for the mathematically challenged to see a clear illustration of how compound interest works? I understand the concept, but the calculations are lost on me.

J.D.
J.D.
11 years ago

For those with trouble reading the “tooltips”, here are the answers. These are taken directly from the journal article and are not my words. (The “tooltips” contain my words.) Millionaire Game Answers 1. True. Four of five millionaires are college graduates. Eighteen percent have Master’s degrees, eight percent law degrees, six percent medical degrees, and six percent Ph.D.s. 2. False. About 2/3 of millionaires work 45-55 hours a week. 3. True. Only 19 percent of millionaires received any income or wealth of any kind from a trust fund or an estate. Fewer than 10 percent of millionaires inherited 10 percent… Read more »

Paul
Paul
11 years ago

I wasn’t surveyed, but here are my responses as someone with a net worth over $1M 1) I have an MBA, my wife a BS 2) It varies, but averages well over 40 3) True. No trust fund here. My wife grew up in a single wide trailer. I was raised in a middle class household. 4) Neither 5) I drive a Ford, but it’s my company car. We own a 2007 Lexus IS 350 and a 1999 Mercedes Benz SLK230. Both were purchased with cash, the Benz was used, the Lexus new. 6) Operations Manager. Mrs is a Realtor.… Read more »

Klug
Klug
11 years ago

J.D., I agree with EscapeVelocity. Where are you going to average 8% interest over 43 years?

That would be a non-trivial feat for any investor. While it’s certainly doable (note your S&P example), I wish folks who did “fun compound interest facts” like this wouldn’t choose relatively outlandish interest rates. Quite often, I see 10% used as a example figure, which these days, is nearly absurd.

Then again, maybe, we’re going to get a return of the Volcker era and we’ll get 10% interest.

WiseMoneyMatters
WiseMoneyMatters
11 years ago

I technically got 100%. I was reading quickly and misread #12. Something in my head thought you were asking if millionaires invested in risky stocks (as in high risk investments). When I reread it, it was very obvious.

And yes, most of this stuff comes from the Millionaire Next Door. Great book!

Darren
Darren
11 years ago

If people are having the tooltips cut off in Firefox, you have two choices to fix it:

1. Upgrade: Firefox 3.x doesn’t have the issue
2. Install the Long Titles extension (http://bit.ly/SHn32)

HTH, HAND

J.D.
J.D.
11 years ago

Folks, I agree 8% interest isn’t realistic. Maybe I should have edited the question before posting it, but I wanted to reprint the quiz verbatim.

Todd
Todd
11 years ago

Great information from a great book (millionaire next door). I got close to 100% since I have read the book (a few times). The quiz and its data is great to point out that the path to wealth for most people is through hard work and living below your means.

Deb Burton
Deb Burton
11 years ago

I made 100%, but then I read The Millionaire Next Door twice. we’re not millionaires, but my husband and I have been following the book’s principles and that of Rich Dad, Poor Dad. We’re still not ready for retirement, but we are debt free, own three houses and have a fairly healthy savings/401K. My husband smartly moved our money out of stocks (for the time being) and into mutual funds (I think?) and so our losses have been dramatically reduced compared to the average. We’re not putting away as much as we were due to the current economy, but we… Read more »

Jamie
Jamie
11 years ago

Got 12 out of 15, though I haven’t read the book only GRS (I guess nice job J.D!) =)

ThatGuy
ThatGuy
11 years ago

@JD

Where did you get your research of 11%? The return is closer to 7%, but that assumes dividend reinvestment. Lastly, one should consider taxes on your dividends, which negatively impact long term return.

-ThatGuy

J.D.
J.D.
11 years ago

ThatGuy, none of the numbers in this post are from me. They’re all from the article I pointed to.

Aryn
Aryn
11 years ago

Sweet! I got a perfect score, too. I think I’ve seen all the answers in Money magazine, though, so maybe that’s cheating.

kick_push
kick_push
11 years ago

i got #1 and #10 wrong

i still believe in my heart that you can become a millionaire without a college degree.. all it takes is hard work

this is 2008.. and there are enough tools and resources available to be self-educated and successful

Ryan
Ryan
11 years ago

Christine wrote: “I got most of these answers correct, less the compound interest ones. Is there a place for the mathematically challenged to see a clear illustration of how compound interest works? I understand the concept, but the calculations are lost on me.” Christine, I want to show you how you can do this on your own, and I’m going to assume you have Excel. If you know how to work with Excel spreadsheets at all, very shortly you’ll be able to create your own spreadsheets and play with all kind of numbers. Open Excel, and if you have the… Read more »

ThatGuy
ThatGuy
11 years ago
For the more technically inclined this PDF contains a wealth of information on the historic return of the S&P 500.

-ThatGuy

Chad @ Sentient Money
Chad @ Sentient Money
11 years ago

If you aren’t averaging an 8% return per year, you need to take more control of your finances. Just putting it in mutual funds and investing in bonds (no idea why anyone more than 5-8 years from retirement would touch a bond, unless they are severly devalued) will never beat 8%.

Ben
Ben
11 years ago

ThatGuy, Not sure where that company is coming up with their research but every professor and financial book that I have read states the long term of the S&P at 11% and bonds at 5% not counting of course taxes and inflation. Figure that most young people are more into stocks than bonds and older people should be more into bonds, 8% is a fair target. Deb Burton, you might want to look up the definition of a mutual fund as most contain those same stocks your husband was probably selling! I’m guessing you meant a mutual fund that’s invested… Read more »

Christine
Christine
11 years ago

Thanks Ryan! I’ll have to experiment with that.

Chris H.
Chris H.
11 years ago

Got one wrong…and thats because AMEX is horrible!! I don’t know a single person with an American Express card. They don’t work anywhere. (Maybe a postive for readers of the site adverse to using cards??)

Ryan
Ryan
11 years ago

It’s true that two of the questions that give specific brand names are a little bit dated. Sears’ Cards and Cadillacs? A better statistic would be the percentage of millionaires whose primary car, the one they drive every day, has a current Kelley Blue Book resale value less than $20,000. And then the percent whose primary credit card is a fancy American Express Black or whatever it’s called with the high annual fees in exchange for concierge services versus a simple Visa or Mastercard that pays 1% back or airline miles or something. Overall though, it’s a good quiz, and… Read more »

ThatGuy
ThatGuy
11 years ago

@Ben,

If you can point me to where stocks achieve a passive return of 11% I will be very impressed and thrilled!

-ThatGuy

Chris H.
Chris H.
11 years ago

@ThatGuy
That is one bada** chart. It looks like there are relatively sustained bigger (>10%) returns after each market downturn. Even though the chart does not account for inflation, it also doesn’t account for dividend reinvestment. I’m sure if people inveting in one of those upswings reinvested the money from a +20% it would probably long run help them jump from a 8% return to potential 11%.
Either way, that chart is really cool. I’ve never seen the P/E ratios over time compared to the return on the market. Really, really neat chart.

Chris
Chris
11 years ago

KickPush, you are right, but JD (and others) look at the averages and it is true that for whatever reasons, there is a correlation between earning potential and education…however, as you point out, you can do it on your own, and clearly you can do ok without a college degree, it’s just tougher. Also we all know stories of people who died and left a fortune and everyone said, “he never made much money as a [fill in the blank]. how did he save so much?” and that difference between earnings and spending is the big difference. but those without… Read more »

JenK
JenK
11 years ago

I regarded the interest questions as word problems that illustrate how compound interest works. No, you will never get that exact return in the real world. But is it valuable for understanding how compound interest works, even on small amounts? Heck yes.

I passed a version of this on in my livejournal, but I did replace a few – instead of the Ford/Cadillac question it’s “Most millionaires lease their cars.”

tom
tom
11 years ago

100%… Go me.

But then again, I read GRS and am somewhat PF savvy (or like to think so).

Adam
Adam
11 years ago

I apologize if this has already been addressed, but this kind of bothers me:
College graduates earn about 65 percent more than high school graduates earn.

I think a very large amount of the difference in pay comes not from the education, but the person. The same reasons that a person does not graduate college are applied to why they have low paying jobs. They are unmotivated. They are not constantly pushing to better themselves. They are lacking in a strong work ethic. The list goes on and on.

I think this is another case of correlation not implying causation.

Tina
Tina
11 years ago

JD,
Millionaire Next Door is a great book, but it was written 10 years ago, so the research on millionaires is pretty dated. Do you know if it’s ever been updated? That would be fascinating.

Donna
Donna
11 years ago

I find the self-employment statistic very encouraging–75% is huge! I always suspected this is the best route for me, but the stats are all the more motivation to foster my entrepreneurial side.

Tony
Tony
11 years ago

I agree that the odds of winning the lottery are low, and that it’s very very very far from a good “investment”, but comparing lottery odds with birth odds is rather misleading as the rates of lottery playing are significantly different from the rates of giving birth. So although the chances of a pregnant woman giving birth to quads may be almost 20 times as likely as of someone picking the winning lottery numbers, in the UK the National Lottery creates approximately 150 millionaires a year, compared to about 1 set of quads being born.

CoolProducts
CoolProducts
11 years ago

I missed 1! And to be honest, I’m glad the answers came out the way I had guessed. It really shows that millionaires are hard working people who use smart investing to help get to where they are. It’s a shame the media has driven kids to the point where they get most of those questions wrong.

Paul
Paul
11 years ago

Kick_push, As to your comment regarding becoming a millionaire without formal education, yes it can be accomplished. I personally know individuals that have net worths of over a million dollars. However, I think the law of averages will show that it is much, much harder to do. Most of the men that became wealthy were able to capitalize on the right opportunity at the perfect time. Could their results be duplicated? Possibly, but I would imagine that it would be harder to nearly impossible to attain the exact financial success. While formal education is not everything, I think that it… Read more »

Jen
Jen
11 years ago

I bet #15 is gender specific – most millionaires are probably male, and traditionally being married for men means having a wife to do lots of your mundane chores for you, whereas for women it traditionally meant having most of your time taken up by other people’s needs. To this day, even though more marriages are more equal now, I think it might be somewhat true that marriage could hold back women who want to be millionaires (Oprah? Martha Stewart? Madonna? All single when they hit 7 figures).

Lee Hall
Lee Hall
11 years ago

As an experienced and previously licensed day trader, I can’t tell you how many fellow traders lost money. I have heard statistics closer to 90%. It’s a tough business to get into and stay in. If you are the lucky few that make money, the markets change so that your market prowess is always challenged. It is very frustrating, humbling and not to be ventured lightly. Even when you win, you feel like you lose. I would advise strong caution before doing it.

Alslayer
Alslayer
11 years ago

Dang I read that book and only got about half right. I guess it is time for me to reread it.

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