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Question 1

1. When developing a personal budget and determining net cash flow, it is important to keep detailed records of all

a. Income and spending
b. Set monthly expenses
c. Income sources
d. Charitable contributions

Answer 1

a. Income and spending

Question 2

What can you do to prepare for unexpected setbacks to reaching financial goals?

a. Reduce any unnecessary expenses
b. Avoid taking risks in your career
c. Refinance your mortgage
d. Put off bills and short-term payments

Answer 2

Reduce any unnecessary expenses

Question 3

Valerie is developing a personal budget for the first time. Which of the following is the first step she should take:

a. Know her income
b. Set her financial goals
c. Estimate her fixed expenses
d. Adjust her debt payments

Answer 3

Know her income

Question 4

Ben saves 18% of his weekly income so that he can purchase a new car. His monthly income is $2,600. How much car money will Ben have in 75 weeks?

a. $8.775
b. $8,424
c. $8,100
d. $9,000

Answer 4

$8.775

Question 5

Which of the following are examples of expenses that should be considered when developing a personal budget

a. Rent, entertainment, and insurance
b. Insurance, dividends, and utilities
c. Food, utilities and salary
d. Entertainment, wages and utilities

Answer 5

Rent, entertainment, and insurance

Question 6

Juan saved $1,000 from his summer job cleaning pools. 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?

a. Regular savings account
b. Money Market account
c. Checking account
d. Certificate of Deposit

Answer 6

Certificate of Deposit

Question 7

Which of these statements about saving is INCORRECT?

a. 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.
b. It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit
c. Without a separate savings account to pay yourself first, it’s more likely that you’ll spend all of your income each month
d. Billions of dollars are spent on marketing to persuade consumers to spend money instead of saving it

Answer 7

It is extremely difficult to open a savings account, as you typically need at least $10,000 for your initial deposit

Question 8

You are 18 years old, opening your first savings account, and are considering three options:
• BANK A is not FDIC insured, has an interest rate of 5%, and a minimum deposit of $25
• BANK B is FDIC insured, has an interest rate of 0.01%, and a minimum deposit of $50
• BANK C is FDIC insured, has an interest rate of 0.02%, and a minimum deposit of $10,000

a. Bank A
b. Bank B
c. Bank C
d. All 3 banks are equally good options

Answer 8

Bank B

Question 9

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.)

a. Daily
b. Monthly
c. Quarterly
d. Annually

Answer 9

Annually

Question 10

Stanley deposits $1,000 into a savings account that pays 1% interest. At the end of the first year, he’s earned $10 in interest and there is $1,010 in the account. If the account has simple interest, the 1% interest for year two would be based off _________. If the account has compounding interest, the 1% interest would be based off __________. (NOTE: The first choice goes in the first blank, the second choice goes in the second blank.)

a. The original deposit ($1,000); The year one account balance ($1,010)
b. The original deposit ($1,000); The year one interest ($10)
c. The year one account balance ($1,010); The year one interest ($10)
d. The original deposit ($1,000); The original deposit ($1,000)

Answer 10

The original deposit ($1,000); The year one account balance ($1,010)

Question 11

Which of the following is an effective strategy for personal saving?
a. Wait until the end of the month and save whatever is left in your checking account
b. Save a certain percentage of each paycheck and deposit it directly into a savings account
c. Cover all of your wants and needs and save whatever is left over
d. Take out a payday loan so you can save before you receive your paycheck

Answer 11

Save a certain percentage of each paycheck and deposit it directly into a savings account

Question 12

Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?
a. 3 months
b. 9 months
c. 24 months
d. 30 months

Answer 12

30 months

Question 13

Which of the following statements about banks is FALSE?
a. If it is FDIC-insured, your money is safe even if the bank fails
b. Many banks pay interest on the money you deposit with them
c. Historically, savings accounts earn higher returns than investments in the stock market
d. Money in a bank is usually easy to access via ATM, debit card, or check

Answer 13

Historically, savings accounts earn higher returns than investments in the stock market

Question 14

You want to take earnings from your part-time job to pay for a new laptop. Your monthly take-home pay is $500 and the laptop costs $1,200. What percentage of your pay do you need to save in order to buy the laptop in 12 months?
a. 5%
b. 10%
c. 15%
d. 20%

Answer 14

d. 20%

Question 15

Which of these account types allow you to write checks from the account?
a. Checking accounts only
b. Checking accounts and online savings accounts
c. Checking accounts and money market accounts
d. Checking accounts, online savings accounts, and money market accounts

Answer 15

Checking accounts and money market accounts

Question 16

16. 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…
    a. Retirement, a house down payment, college tuition
    b. A new cell phone, college tuition, a house down payment
    c. A new cell phone, dinner with friends this weekend, a new bike
    d. Retirement, college tuition, a vacation

Answer 16

b. A new cell phone, college tuition, a house down payment

Question 17

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 __________.
a. Needs, wants, savings
b. Savings, needs, wants
c. Needs, savings, wants
d. Wants, needs, savings

Answer 17

c. Needs, savings, wants

Question 18

Which statement best describes the difference between saving and investing?
a. Saving is done with small amounts of money, and investing is done with large amounts of money
b. Saving protects your money from inflation while investing does not protect your money from inflation
c. Saving is for low-income people, while investing is for rich people
d. Saving goes into an FDIC-insured bank, while investing typically goes into stock or bond markets

Answer 18

d. Saving goes into an FDIC-insured bank, while investing typically goes into stock or bond markets

Question 19

19. Which represents the best time to start saving for your retirement?
    a. As soon as you graduate and have your first full-time job
    b. Right after you pay off your student loans
    c. Once you are debt-free, including paying off all credit cards, auto loans, and your mortgage
    d. At age 45, so you have exactly 20 years until retirement

Answer 19

As soon as you graduate and have your first full-time job

Question 20

Which of the following statements is TRUE?
a. The majority of Americans have an adequate emergency fund
b. The majority of Americans have sufficient amounts of money saved for retirement
c. The majority of Americans have an adequate emergency fund, but do NOT have sufficient amounts of money saved for retirement
d. The majority of Americans do NOT have an adequate emergency fund OR sufficient amounts of money saved for retirement

Answer 20

d. The majority of Americans do NOT have an adequate emergency fund OR sufficient amounts of money saved for retirement

Question 21

Why is investing a better option than saving when it comes to planning for retirement?
a. Investing usually has lower interest rates, so it offers a better deal
b. Investing is guaranteed to produce the large sum of money needed for a happy retirement
c. Investing begins as soon as you open a bank account, so you can start early in life
d. The stock market historically has returns higher than the rate of inflation, so your money can actually grow

Answer 21

d. The stock market historically has returns higher than the rate of inflation, so your money can actually grow

Question 22

Experts recommend that you accumulate enough to cover 3 to 6 __________ of expenses in your emergency fund.
a. Days
b. Weeks
c. Months

Answer 22

c. Months

Question 23

What is meant by the term “impulse shopping?”
a. Comparison shopping for more expensive items while doing less work to compare cheaper items
b. Buying an item without giving it much thought, maybe because it’s on sale or you see it and simply love it
c. Using your emergency fund, rather than your checking account, to make a purchase
d. Shopping online instead of in stores

Answer 23

b. Buying an item without giving it much thought, maybe because it’s on sale or you see it and simply love it

Question 24

Which of these is an example of “FOMO?”
a. Buying new sneakers the day they come out, because you know others in your class will have them, too
b. Applying to the top colleges, to see if you’ll get accepted and what financial aid packages they’ll offer
c. Saving for retirement as soon as you graduate college, to take advantage of compounding interest
d. Buying plane tickets for vacation well in advance so that you’ll benefit from cheaper prices

Answer 24

a. Buying new sneakers the day they come out, because you know others in your class will have them, too

Question 25

25. Your sister Reagan has her paycheck direct deposited into her checking and savings accounts each pay period. She asks you how she should split her paycheck between the two accounts. What is the best advice you could offer her to encourage her savings habit?
    a. Direct deposit the full amount of the check each month into her checking account and then decide later how much to put into savings
    b. Add at least 95% of her paycheck to her checking account and 5% to her savings account because you know that saving is hard for her
    c. Add at least 10-20% of her paycheck to her savings account and the remaining 80-90% to her checking account
    d. Do not have her paycheck direct deposited since it is NOT a secure way to transfer money

Answer 25

c. Add at least 10-20% of her paycheck to her savings account and the remaining 80-90% to her checking account

Question 26

26. In current markets, which of these represents a competitive but realistic interest rate on a savings account?
    a. 2%
    b. 5%
    c. 7%
    d. 17.99%

Answer 26

a. 2%

Question 27

27. Which of these lists ranks the savings options from highest expected interest rate to lowest expected interest rate?
    a. Online savings account, 5-year CD, Savings account at a traditional bank, 10-year CD
    b. Savings account at a traditional bank, Online savings account, 5-year CD, 10-year CD
    c. Savings account at a traditional bank, Online savings account, 10-year CD, 5-year CD
    d. 10-year CD, 5-year CD, Online savings account, Savings account at a traditional bank

Answer 27

d. 10-year CD, 5-year CD, Online savings account, Savings account at a traditional bank

Question 28

28. How is an online savings account different from a traditional savings account?
    a. An online savings account includes a mobile app, while a traditional savings account does not
    b. An online savings account is offered by a bank that customers can only access online rather than at a physical bank branch
    c. Online savings accounts will only offer electronic statements rather than paper copies
    d. Online savings accounts cannot be FDIC insured, whereas traditional savings accounts can

Answer 28

b. An online savings account is offered by a bank that customers can only access online rather than at a physical bank branch

Question 29

Three of these statements best describe a checking account. Which statement best describes a savings account?
a. This account offers a convenient way to pay bills and access cash from an ATM
b. This account pays you interest on money you have put away for later to help your money grow
c. This account is automatically debited when you use a debit card
d. This account typically allows an unlimited number of transactions per month

Answer 29

b. This account pays you interest on money you have put away for later to help your money grow

Question 30

30. 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?
    a. Aunt Tina gets a paycheck one month, and her husband gets a paycheck the next month; they alternate pay periods
    b. 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
    c. Aunt Tina and her family have high paying jobs and don’t worry much about money
    d. Aunt Tina uses her paychecks as income to deposit into her checking and savings accounts

Answer 30

b. 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

Question 31

31. Buying drinks from the local coffee shop is a variable expense because
    a. It is the easiest expense to cut from a budget
    b. It is not a necessary expense
    c. It is less costly than most other expenses
    d. The amount spent varies from month to month

Answer 31

b. It is not a necessary expense

Question 32

32. When a person has a balanced budget that includes savings then
    a. Net income = discretionary income
    b. Total expenses = savings
    c. Total income = total expenses – savings
    d. Total expense + savings = total income

Answer 32

d. Total expense + savings = total income

Question 33

Which of these costs would be the MOST difficult to adjust if you were looking to reduce your expenses?
a. Dining out at local restaurants
b. Loan payment on a new car
c. Expenses for new clothes
d. Postponing the purchase of a big-screen TV

Answer 33

b. Loan payment on a new car

Question 34

You earn a salary of $40,000 per year and decide to save 20% of your gross pay. You then set a goal of creating a $16,000 emergency fund. How long will it take for your to achieve your goal?
a. 6 months
b. 1 year
c. 2 years
d. 3 years

Answer 34

c. 2 years

Question 35

Which of the following is a sign that you have a budget deficit?
a. Your savings account balance grows every month
b. You overdraw your checking account on a consistent basis (with a $34 fee per overdraft)
c. Your checking account balance grows every month
d. You pay more than the minimum monthly loan payment towards your student loans

Answer 35

b. You overdraw your checking account on a consistent basis (with a $34 fee per overdraft)

Question 36

36. Leila just graduated from college and is comparing a few different cities to move to. Which of these factors is the LEAST important thing for her to consider right now?
    a. Average rent for an apartment
    b. Food and grocery store options in the area
    c. Employment opportunities
    d. Average cost of Uber, Lyft, or taxi fare for going out

Answer 36

d. Average cost of Uber, Lyft, or taxi fare for going out

Question 37

Greg is trying to decide whether he needs a car or not when he moves to the city. Which of the following would convince Greg to get a car rather than use public transportation?
a. There are several public transportation routes between Greg’s apartment and work
b. The cost of public transportation is less than Greg’s monthly car payment
c. Greg’s company covers half the cost of his monthly public transportation pass
d. Using public transportation, Greg’s commute to work one-way is two hours longer than by car

Answer 37

d. Using public transportation, Greg’s commute to work one-way is two hours longer than by car

Question 38

Which of these boxes of cereal has the LOWEST unit price?
a. Cereal A, which costs $3.20 for a 16 oz. box
b. Cereal B, which costs $5.00 for a 32 oz. box
c. Cereal C, which costs $2.50 for a 10 oz. box
d. Cereal D, which costs $4.50 for an 8 oz. Box

Answer 38

b. Cereal B, which costs $5.00 for a 32 oz. box

Question 39

You are putting together your first post-graduation budget. Your take-home pay will be $2,500 per month. You estimate your monthly costs to be: Rent of $900, car-related expenses of $550, entertainment of $200, food expense of $250, cable bill of $75, mobile phone of $100, student loan payment of $400, and other expenses of $150. How would you describe your budget after analyzing all of your income and expenses?
a. You have a surplus of $125
b. You have a deficit of $125
c. You have a deficit of $2,625
d. You have a surplus of $2,500

Answer 39

b. You have a deficit of $125

Question 40

Which of the following is a BAD budgeting strategy to use if you want to save money at the grocery store?
a. Prepare a grocery list before you go to the store, and avoid buying items that aren’t on the list.
b. Build a weekly meal plan around items you already own or items that are on sale that week, rather than just choosing foods you’d like to eat
c. When comparing similar products, focus on the price only
d. When comparing similar products, be sure to compare based on unit price

Answer 40

c. When comparing similar products, focus on the price only

Question 41

41. John wants to buy a car and is trying to decide whether he wants to accept a pre-qualified auto loan from his credit union or if he wants to directly finance the car from the dealership. What should he do?
    a. Finance the car directly with the dealership since they always have better interest rates
    b. Compare the two offers and choose the one through which he’d pay the least amount of money overall
    c. Finance the car with the credit union – since they’re a local organization, they always have the customers’ best interests at heart
    d. Compare the two offers and choose the one with the longest term so that he has more time to pay it off

Answer 41

b. Compare the two offers and choose the one through which he’d pay the least amount of money overall

Question 42

Aaron realizes he has a budget deficit of roughly $175 at the end of two months in a row. Which of these options makes the most sense for him to fix his problem?
a. Cancel his cable TV subscription and go out to dinner three fewer times each month with friends
b. Start paying just the minimum monthly payment on his student loan and credit card debt, instead of the extra he’s been contributing
c. Contribute $100 less to savings each month and $75 less to his retirement fund
d. Sell his current car and get a less expensive vehicle

Answer 42

a. Cancel his cable TV subscription and go out to dinner three fewer times each month with friends

Question 43

You’re considering moving into a 3 bedroom apartment with 2 roommates, rather than living on your own after graduation. Mark which of YOUR expenses would likely decrease by having roommates.
a. Groceries and eating out
b. Rent
c. Cell phone bill
d. Bedroom furniture

Answer 43

b. Rent

Question 44

Danaisha does all her grocery shopping at organic markets and has a monthly grocery bill of $325. Charles says that Danaisha is wasting her money on wants instead of focusing on needs. He buys in bulk, uses coupons, and shops at Save-More for a monthly bill of $195. Who’s budgeting correctly for food?
a. Danaisha, because she is focusing on her health, which will have a guaranteed payoff in the long run
b. Charles, because he’s making efforts to save money by focusing on his needs only
c. Both, because needs vs. wants are determined on an individual basis
d. Neither, because they should meet in the middle somewhere. Charles should focus more on health, and Danaisha should cut her spending

Answer 44

c. Both, because needs vs. wants are determined on an individual basis

Question 45

Ming is excited to start looking for an apartment. She knows that you just learned about renting an apartment and gives you a list of steps she thinks she should take to find the right fit for her. Which of the following steps would you recommend she can SKIP when doing her INITIAL research?
a. Ask the leasing office what color the room is painted to make sure that she is comfortable with the look and feel of the room
b. Find out if she would be living with roommates, and if so, how many
c. Research the cost of utilities
d. Find out how long it would take her to go to work and other places she goes frequently

Answer 45

a. Ask the leasing office what color the room is painted to make sure that she is comfortable with the look and feel of the room

Question 46

You overhear your cousin talking about the importance of creating and sticking to a budget. Which of the following reasons he gives is actually FALSE?
a. A budget can help you identify any bad spending habits
b. Using a budget can allow you to work toward your financial goals
c. Having a budget can help you create an emergency fund
d. Using a budget can qualify you for special discounts at your favorite stores

Answer 46

d. Using a budget can qualify you for special discounts at your favorite stores

Question 47

47. Franny is a recent college graduate with little budgeting experience. She is trying to stick to her budget, but is finding that she continues to have a deficit at the end of each month. Which of the following steps she takes could explain why this keeps happening?
    a. Franny uses her net pay when budgeting her money
    b. Franny uses the 50-20-30 rule to allocate her money
    c. Franny tracks her monthly spending at the end of the month
    d. Franny has identified her needs and wants

Answer 47

c. Franny tracks her monthly spending at the end of the month

Question 48

Joanne is buying a new car for the first time and wants to make sure she does everything she can do to minimize the overall cost. Which of the following will help her the MOST?
a. Putting an extra $50 toward her down payment
b. Lowering her interest rate from 4% to 2%
c. Increasing her loan term from 60 months to 84 months
d. Getting an upgraded model of the car in the same class

Answer 48

b. Lowering her interest rate from 4% to 2%

Question 49

49. Now that Sanjana is done with college, she is trying to decide whether or not she should buy a new laptop for herself. She has made a preliminary list of questions she can ask herself to determine if the new laptop is a need or a want. Which of the following questions would you ELIMINATE from this list?
    a. Can I afford this laptop right now?
    b. Is this the right time to buy this laptop or will it likely be on sale later?
    c. What model laptop is trendy right now with people my age?
    d. How am I going to pay for this laptop? If I have to charge it or take out a loan, can I afford the monthly payments?

Answer 49

c. What model laptop is trendy right now with people my age?

Question 50

Before submitting an application to rent an apartment, you would like to go and inspect the property. Which of the following reasons is the LEAST important reason for why you would go and inspect the apartment?
a. You want to check on the condition of the property and get a feel for the surrounding neighborhood.
b. You want to show the apartment to your family and friends.
c. You want to meet with the landlord or property manager to be sure that all of your questions are answered.
d. You want to document any damage that you find in the apartment so it is repaired before you move in.

Answer 50

b. You want to show the apartment to your family and friends.

Question 51

51. Which of the following explains why it might be a good idea to buy an item in a smaller size with a HIGHER unit price instead of buying it in bulk at a LOWER unit price?
    a. You have a large apartment with plenty of space for storage.
    b. You have a roommate who’d like to share the item because she likes it, too.
    c. You need lots of this item and go through it quickly.
    d. You don’t plan on using this item too often, and it’ll go to waste if you have it for too long.

Answer 51

d. You don’t plan on using this item too often, and it’ll go to waste if you have it for too long.

Question 52

Which statement accurately describes how the 50/20/30 Rule would break down your take-home pay?
a. 50% on flexible expenses, 20% on financial goals, and 30% on living expenses and essentials
b. 50% on financial goals, 20% on living expenses and essentials, and 30% on flexible expenses
c. 50% on living expenses and essentials, 20% on financial goals, and 30% on flexible spending
d. 50% on financial goals, 20% on flexible expenses, and 30% on living expenses and essentials

Answer 52

c. 50% on living expenses and essentials, 20% on financial goals, and 30% on flexible spending

Question 53

When you subtract your liabilities from your assets, you are calculating your ___________.
a. Net worth
b. Expenses
c. Budget
d. Gross Pay

Answer 53

a. Net worth