Savings Unit Semester Exam Review

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?

• Regular savings account

• Money Market account

• Checking account

• Certificate of Deposit

Which of these statements about saving are correct?

• 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 it.

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. All three have fees competitive with other banks. Which bank is the best option?

• A

• B

• C

• All 3

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

• Qarterly

• Annually

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 into 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

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?

• 3 months

• 9 months

• 24 months

• 30 months

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

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?

• 5%

• 10%

• 15%

• 20%

Which of these account types allow you to write checks from the account?

• Checking accounts only

• checking and online savings accounts

• checking and money market accounts

• checking, online savings accounts, and money market accounts

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