Working out what you know and do not know

Did you know males typically think they know more than they actually do when compared to females?

In a study into the capacity for an individual to know when they are right, and to know when they were wrong, it was found that females were often under-confident while males were over-confident regardless if they were actually right or wrong.

Particularly, even when correct, females more readily doubted themselves when compared to their male counterparts, while males were more confident of their answers even when incorrect.

While being self-assured and confident can be very useful, being blindly over-confident can lead to costly and impactful decisions, particularly when dealing with money.

Imagine giving all 17 year olds a car, without testing and refining their driving ability. The risk to the driver, passengers and other road users is significant. It is for this reason that we have driving tests, to not only test the competence of drivers, but to also help a person realise and rectify areas that need improvement.

Similar risk and wastage can also arrive by giving someone $60,000 per annum, a loan of $350,000, and never testing and refining one's financial competence.

It's not hard to discover what you know and don't know about personal finance. All you need to do is try out some of these quizzes.

You can then use your results to further refine your knowledge and your capacity to calibrate your confidence. Here is an article about calibration of confidence and avoiding the financial skids.