Unit 2 Test Review - Savings

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

• Inflation can eat up the interest earned.

• The emergency fund is not intended to grow wealth.

Which of the following is not a reason your emergency fund should be kept in a separate savings account away from your spending money?

• So that your emergency fund savings can earn a lot of interest

• So that you do not get your spending and saving money confused

Which of the following steps is the First Foundation?

• Get out of debt.

• Save a $500 emergency fund.

• Pay cash for your car.

An interest-bearing account is an account that generates interest income on the available balance in the account.

• True

• False

Money today has different buying power than the same amount of money in the future.

• Compound interest

• Time value of money

Your income level greatly affects your saving habits.

• True

• False

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

• Emergency fund

• Large purchases

• Have money available to lend to friends

Americans typically maintain a very high savings rate.

• True

• False

You should hold off on investing for retirement until you have college or other post-secondary education paid for.

• True

• False

What does it mean to have a negative savings rate?

• Spending more money than you make and acquiring debt

• Saving for something that is a want instead of a need