ATM Financial Literacy Review Part 2

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 al credit cards, auto loans, and your mortgage

• At age 45 so your have exactly 20 years until retirement

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

Experts recommend that you accumulate enough to cover 3 to 6 --- of expenses in your emergency fund.

• days

• weeks

• months

• years

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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?

• Direct deposit the full amount of the check each month into her checking account and then decide later how much to put into savings.

• Add at least 95% of her paycheck to her checking account and 5% to her savings account because you know that savings is hard for her.

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

• Do not have her paycheck direct deposited since it is NOT a secure way to transfer money

Which of the following statements comparing credit and debit cards is TRUE?

• Far more businesses accept credit cards than debit cards

• Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard

• Credit card companies provide you with a monthly statement, while debit cards do not

• With debit cards, you're spending your own money at point of sale, while with credit cards, you're promising to pay back the money eventually

Which of these statements best explains why it's often a good idea to pay more than the monthly amount due on an amortized loan?

• Every time you pay extra, the lender will reduce the interest rate they're charging by a small amount

• The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly

• The extra payment will be applied to the interest you owe, which will reduce the overall cost of your loan.

• Amortized loans typically have much higher interest rates than credit cards, so they're the best place to put your extra cash

If you are having trouble making auto loan payments, and are really following a tight budget, which recommendation below the WORST advice?

• Find an extra source of income by taking a second job, working longer hours, asking for a raise, etc

• Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

• Continue making all payments and call our lender and see if you can negotiate lower monthly payments, lower interest rates, or longer terms

• Reduce spending in some other area of your budget so you can direct more funds toward debt payments

Which of these credit payback strategies would lead to the HIGHEST interest charges?

• Paying off your credit card bill in full every month

• Paying 20% of your credit card balance every month on time

• Making the minimum payment (3% of your credit card balance) every month on time

• Making the minimum payment (3% of your credit card balance) every month with an occasional late payment

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What is an advantage of using a credit card?

• It will not affect your credit score or credit history

• Since it is tied directly to your checking account, it prevents you from spending money you do not have

• If you need to carry a balance, the interest rates are generally quite low (less than 5%)

• If you pay off your balances every month in full, it's like getting a short-term interest-free loan

Which of the following statements is CORRECT about secured loans?

• They are an example of a credit card

• They require collateral, in the form of assets like a car or a home, to be exchanged for the loan

• In the event of default, the borrower loses nothing except for the down payment

• They usually have higher interest rates as compared with unsecured loans