Misunderstandings and misconceptions are common in the areas of investments, taxation, law, and public policy.

And it is no wonder! These subjects have become increasingly complex, as we have had decreasing personal time to deal with them.

The National Endowment for Financial Education in the US recognises that financial education has to be promoted on a constant basis, starting with junior high school level. In conjunction with educators across the nation, they endorse a financial planning programme and financial literacy test every fall among all schools in the nation.

The programme guides students to take action and increase financial IQ. It is flexible and easy to use, non-commercial, available at no cost, created by top educators and financial professionals and inked to education standards in all 50 states and to several national subject-area standards

Unit topics include: Your Financial Plan: Where It All Begins; Budgeting: Making the Most of Your Money; Investing: Making Money Work for You; Good Debt, Bad Debt: Using Credit Wisely; Your Money: Keeping It Safe and Secure; Insurance: Protecting What You Have; Your Career: Doing What Matters Most.

If it all sounds familiar, these are topics, financial educators and certified professional planners have been promoting for years, for students and adults.

The following quiz has been adopted for our offshore financial centre environment. If your brain has not been completely taxed from a rough week, take the quiz and see whether you think these statements are correct. Note that this time around, you only have to answer right or wrong because my colleague, Roger, complained about the last year's test 'being too hard!'

Finance

1. There is a great investment fund offer out there - a 15 percent annual return - guaranteed. Right or wrong?

2. My deposits at the bank are free - there is no fee. Right or wrong?

3. Which is better: the average return of the market every year for three years - it's about seven percent - or getting annual returns of, first year a negative 20 percent, second year a negative 23 percent, and third year a positive return of 53 percent?

4. I own a high-grade corporate bond. It will pay me interest every six months until it matures. Right or wrong?

5. My preferred stock shares are callable next year. I know the financial services company will absolutely give me my money back then. Right or wrong?

6. Inflation really does not affect me; my pay will just go up to compensate. Right or wrong?

7. I own a money market fund that pays about two percent per annum. If I invest $1,000 at the end of the full year, I will have $1,020. Right or wrong?

8. It is not a problem owning stocks, I can always sell them. Right or wrong?

9. My mortgage rate was recently reduced. This means the principal amount I have to pay back has been reduced too. Right or wrong?

10. My house was valued at $400,000 for property insurance, but the replacement value is $800,000. I filed a claim for a new roofing cost of $20,000, but they gave me only $10,000. Right or wrong?

International citizen issues

11. I am a US citizen, but I married a Bermudian and now live here permanently. I do not have to file a return or report on my investments because I live outside the US. Right or wrong?

12. I have two passports, one of which is a US passport, but I consider myself a Bermudian, so I use my Bermuda passport for all my trips to the US. Right or wrong?

13. I'm a dual citizen with the US, but I don't work anymore, I just manage my $2 million portfolio, so I don't have to file a return because I don't have a salary. Well, of course, you do not have to work - wish I had your money! Right or wrong?

14. I'm retiring. Years ago, I divorced my US spouse after 25 years of marriage. He has been married three times since then, so I don't think I can apply for any of his social security payments. Right or wrong?

15. I am Canadian, left the country like a 100 years ago. I bought a house back there about two years ago and opened a bank account in my name to hold my savings. Since I left so long ago, it is not a problem. Right or wrong?

16. My grandfather died in the UK and left us all some money. I live here, but my siblings live there. Someone told me that the money he left me is tax-free to me. Right or wrong?

Law

17. I am a private person, I don't want anyone to know anything about me. My lawyer can never tell anyone anything about me, ever. Right or wrong?

18. I do not have a will; it does not matter, my sister will get everything so that she can take care of my children. Right or wrong?

19. Our Bermuda will can be used anywhere that we have real estate. Right or wrong?

20. Our bank account is held jointly in both our names. The account reads, John Jones or Ruth Jones. We both have to sign every withdrawal cheque. Right or wrong?

21. I have been getting an annuity with my pension. I don't like what's happening in the markets and intend to change it to something else. Right or wrong?

Public Policy

22. My government social services are free. Right or wrong?

23. My old age pension is indexed for inflation. Right or wrong?

24. I don't think I can get a record of employer contributions to my social insurance? Right or wrong?

25. The house that I want to designate my Primary Resident Homestead (for the exemption from death duty) has my father's name on the deed, but I can apply for it anyway because he has willed it to me. Right or wrong?

26. When I convert 100 Bermuda dollars to US dollars, I am losing about one percent. Right or wrong?

Disclaimer: this article is for general information purposes only and is not to be used as specific tax advice for any individual situation. IRS CIRCULAR 230 NOTICE: Pursuant to recently enacted US Treasury Department Regulations, I am now required to advise you that, unless otherwise expressly indicated, any federal tax information (or advice) expressed above was neither written, nor intended by the author to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed under US tax law.

Martha Myron CPA CFP® (US) TEP (UK) is an Equity Partner and a US Federally Authorized Tax Practitioner at Patterson Partners Ltd., the only independent fee-based cross border financial planning firm in Bermuda. She specializes in comprehensive financial counsel and solutions in the areas of investments, tax, retirement, and estate planning for internationally mobile people, Bermuda residents with cross border connections and US citizens (green card holders)/dual citizens. The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.