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- 1. Multiple Choice
John saved $2,000 from his summer job mowing yards. Which of these savings vehicles would work best for him if he doesn't need access to the money for a number of years AND wanted to earn the highest interest rate?
Regular savings account
Money Market account
Checking account
Certificate of Deposit
- 2. Multiple Choice
Which of these statements about savings is INCORRECT?
People often believe they are saving when they buy products at a listed discount, even if they didn't need the product in the first place
It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit
Without a separate savings account to pay yourself first, it's more likely that you'll spend all of your income each month
Billions of dollars are spent on marketing to persuade consumers to spend money instead of saving.
- 3. Multiple Choice
When a bank says their savings account earns 1% interest, that typically means you will earn 1% interest over what period of time (Note: this is not referring to the compounding frequency or frequency of interest payment)?
Daily
Monthly
Quarterly
Annually
- 4. Multiple Choice
Which of the following is an effective strategy for personal saving?
Wait until the end of the month and save whatever is left in your checking account
Save a certain percentage of each paycheck and deposit it directly in a savings account
Cover all of your wants and needs and save whatever is left over
Take out a payday loan so you can save before you receive your paycheck
- 5. Multiple Choice
Joe wants to have an emergency fund to cover 3 months of his expenses. Her monthly gross pay is $3,000 and her monthly expenses are $1,200. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?
4 months
6 months
1 year
3 years
- 6. Multiple Choice
Which of the following statements about banks is FALSE?
If it is FDIC-insured, your money is safe even if the bank fails
Many banks pay interest on the money you deposit with them
Historically, savings accounts earn higher returns than investments in the stock market
Money in a bank is usually easy to access via ATM, debit card or check
- 7. Multiple Choice
Which of the following is NOT a good reason to create an emergency fund?
Provides peace of mind
Keeps you out of debt by giving you money to cover unexpected expenses
Pays for big ticket items like a vacation or designer clothing
Covers your expenses if you should lose your job
- 8. Multiple Choice
You are developing a savings plan and using short-, medium-, and long-term goals to motivate you. Which represents possible goals from short-term to long-term? Save for…
Retirement, a house down payment, college tuition
A new cell phone, college tuition, a house down payment
A new cell phone, dinner with friends this weekend, a new bike
Retirement, college tuition, a vacation
- 9. Multiple Choice
Fill in the blanks with the correct responses. If you follow the 50-20-30 rule of budgeting, you'll be putting 50% of your monthly income toward _______________, 20% of your monthly income toward _____________, and 30% of your monthly income toward ______________.
Needs, wants, savings
Savings, needs, wants
Needs, savings, wants
Wants, savings, needs
- 10. Multiple Choice
Which statement best describes the difference between saving and investing?
Saving is done with small amounts of money, and investing is done with large amounts of money
Saving protects your money from inflation while investing does not protect your money from inflation
Saving is for low-income people, while investing is for rich people
Saving goes into an FDIC insured bank while investing typically goes into stock or bond markets
- 11. Multiple Choice
Which represents the best time to start saving for your retirement?
As soon as you graduate and have your first full-time job
Right after you pay off your student loans
Once you are debt-free, including paying off all credit cards, auto loans, and your mortgage
At age 45, so you have exactly 20 years until retirement
- 12. Multiple Choice
Which of the following statement is TRUE?
The majority of Americans have an adequate emergency fund.
The majority of Americans have sufficient amounts of money saved for retirement.
The majority of Americans have an adequate emergency fund, but do NOT have sufficient amounts of money saved for retirement.
The majority of Americans do NOT have an adequate emergency fund or sufficient amounts of money saved for retirement.
- 13. Multiple Choice
Why is investing a better option than saving when it comes to planning for retirement?
Investing usually has lower interest rates, so it offers a better deal
Investing is guaranteed to produce the large sum of money needed for a happy retirement
Investing begins as soon as you open a bank account, so you can start early in life
The stock market historically has returns higher than the rate of inflation, so your money can actually grow
- 14. Multiple Choice
Experts recommend that you accumulate enough to cover 3 to 6 __________________ of expenses in your emergency fund.
Days
Weeks
Months
Years
- 15. Multiple Choice
Which of these is an example of "Keeping up with the Joneses?"
Buying new sneakers the day they come out, because you know others in your class will have them, too
Applying to the top colleges, to see if you'll get accepted & what financial aid packages they'll offer
Saving for retirement as soon as you graduate college, to take advantage of compounding interest
Buying plane tickets for vacation well in advance so that you'll benefit from cheaper prices
- 16. Multiple Choice
In current markets, which of these represents a competitive but realistic interest rate on a savings account?
1%
2%
3%
7%
- 17. Multiple Choice
Three of these statements best describe a checking account. Which statement best describes a savings account?
This account offers a convenient way to pay bills and access cash from an ATM.
This account pays you interest on money you have put away for later to help your money grow.
This account is automatically debited when you use a debit card.
This account typically allows an unlimited number of transactions per month.
- 18. Multiple Choice
You overhear your Aunt Tina tell your mom that she, her husband, and their kids are "living paycheck to paycheck." What does Aunt Tina mean by that?
Aunt Tina gets a paycheck one month, and her husband gets a paycheck the next month; they alternate pay periods
Aunt Tina and her family don't have any money saved, and their paychecks are just barely covering monthly expenses, so they use every dollar every month
Aunt Tina and her family have steady incomes with a guaranteed paycheck every two weeks
Aunt Tina uses her paychecks as income to deposit into her checking and savings accounts
- 19. Multiple Choice
Emergencies, vacations, social events, and major purchases are examples of short-term needs.
True
False
- 20. Multiple Choice
Compound interest refers to interest paid on principal and interest.
True
False
- 21. Multiple Choice
When choosing a financial institution in which to place your savings, you should consider safety, liquidity,convenience, and purpose.
True
False
- 22. Multiple Choice
Deposits in savings and loan associations and commercial banks are insured by the FDIC.
True
False
- 23. Multiple Choice
If a depositor withdraws part or all of a certificate of deposit before its maturity date, there will be an early withdrawal penalty.
True
False
- 24. Multiple Choice
Financial institutions can offer interest compounded daily because of computers that make rapid computations possible.
True
False
- 25. Multiple Choice
Some ways to make saving easier include direct deposit and automatic deductions.
True
False
- 26. Multiple Choice
Which of the following is not an example of long-term savings goal?
home ownership
college education
retirement
automobile purchase
- 27. Multiple Choice
Which of the following items is the most liquid?
home
regular savings
certificate of deposit
automobile
- 28. Multiple Choice
A type of savings plan whereby you set aside money at a financial institution for a set period is a
regular account
share draft account
certificate of deposit
money market account
- 29. Multiple Choice
Which of the following is NOT a benefit of direct deposit?
Your money is available in your account faster.
You do not have to make a special trip to the bank.
You can have part or all of your deposit put into your savings account.
Your money earns more interest than in any other type of savings plan.
- 30. Multiple Choice
Which of the following do banks usually offer?
ATMs
numerous locations
drive-up windows
all of these
- 31. Multiple Choice
The FDIC insures a depositor's money up to
$10,000
$20,000
$100,000
$250,000
- 32. Multiple Choice
Of the following items, which pays the highest total interest when deposits are withdrawn at irregular times?
compounded quarterly
compounded daily
compounded yearly
compounded monthly
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