Foundations in Personal Finance Chapter 2 Part 1

At your age, a fully funded emergency fund should be: 

• $500 
• $1,000 
• $100 
• $5,000

Which of the following is not one of the three basic reasons for saving money? 

• Build wealth 
• Emergency fund
• Large purchases 
• Have money available to lend to friends

Instead of borrowing money for large purchases, you should set money aside in a ________ over time and pay with cash.

• Sinking fund

• Mortgage fund

• Emergency fund

• Credit card fund

For which of the following should you save? 

• Purchases 
• Emergency fund
• Wealth building 
• All of these

Which of these is not a key to saving money? 

• Your income 
• Making saving a habit and a priority
• Focus 
• Discipline

Which of the following steps is the First Foundation? 

• Pay cash for your car 
• Build wealth and give
• Save a $500 emergency fund 
• Get out of debt

Why is having a fully funded emergency fund so important when it comes to your financial well-being?

• The purpose of an emergency fund is to set money aside for unexpected financial emergencies and to provide a sense of financial security.
• The purpose of an emergency fund is to have money set aside for large purchases, like vacations.
• As long as you have a good-paying job, you really don't need an emergency fund.
• None of these

Which of the following is a reason that people don't save money? 

• They do not live on a budget 
• They lack focus
• They lack discipline 
• All of these 

Why should interest earned not be a factor with your emergency fund? 

• Interest-bearing accounts at banks earn a high rate of interest, therefore, interest is not a concern.
• Inflation can eat up the interest earned.
• The emergency fund is not intended to grow wealth.
• None of these 

This principle suggests that a certain amount of money today has different buying power than the same amount of money in the future. This is due to both the opportunity to earn interest on the money and because inflation will drive prices up, thereby changing the "value" of the money.

• Inflation

• Time value of money

• Interest rate

• Opportunity cost